You made an offer on a property, and the seller accepted. At first, you may have felt excited because the home met all of your personal criteria or was in the right school district.
However, as you have gotten closer to closing, your situation has changed. Maybe your spouse lost their job and you can’t afford to upgrade your house anymore. Perhaps the inspection showed signs of issues that would cost tens of thousands of dollars to replace. You may have listed your own house but can’t seem to get anyone interested in buying it, leaving you without the funds to close on your new home.
If you have to cancel the transaction, what do you have at risk?
Your earnest money is at risk if you walk away from a purchase
People often get cold feet when making an offer on a home. After all, most people will never make a bigger purchase than a house at any point in their lives. When cold feet or changing opinions lead to someone canceling a closing, the seller can usually retain their earnest money as compensation for the inconvenience and delay.
Earnest money might be as little as 1% or as much as your entire downpayment. The only way to protect your earnest money if you retract an offer and refused to follow through with the purchase is by including contingencies in your original offer. The right terms can protect you and give you an opportunity to back out of the transaction if you can’t sell your house or the property doesn’t pass an inspection.
Identifying your potential risks in a residential real estate transaction can help you protect yourself and make better choices about this very big upcoming purchase.