Sometimes after a person writes a purchase contract on a home, that gets accepted, they may experience some “buyers remorse” and wonder now if they are officially locked into buying that property and the answer is “no.”
I’m not promoting going under contract and backing out but at times it might be necessary. Here are the contingencies that apply and give you the ability to back out if necessary.
1. Inspection Period – in the Arizona contract the default inspection time is 10 days for which you can conduct any an all inspections. This default time can be lengthened or shortened when writing a contract. We’ve seen people cutting this timeline down to make their offer more competitive but just remember all of these inspectors are busy and you don’t want to cut yourself to short and not be allowed to do your proper due diligence.
During the inspection period you can back out for basically any reason, as long as it’s property related. Saying you just changed your mind is not acceptable so your agent needs to word your cancelation notice correctly. In this event you would receive all of your earnest deposit back.
2. Financing Contingency – if you are unable to secure financing, meaning the bank won’t grant you your loan then you have the right to cancel and receive your earnest deposit back.
3. Appraisal Contingency – if you are getting a loan or if you are a cash buyer but also included that wanted an appraisal contingency (this has to be requested with a cash offer it’s not automatic like with financing). If the home does not appraise for the purchase price and the seller will not lower the price you have the right to cancel and receive your earnest money back as well.
4. Risk of Loss – if the home is damaged beyond 10% of the purchase price from the time your offer was accepted and the time you close, you have the right to cancel and receive your earnest money back.
5. Sellers Disclosures & CC&R’s – both of these documents are usually provided by the title company during the inspection period for your review. If you don’t agree with the information on these documents – such as something is disclosed that scares you about the property or the community rules are too strict you have the right to cancel based on this information.
The seller is responsible to update the seller’s disclosures, with anything that changes on the property until the close of escrow and send the updated copy to the buyer. The buyer now has 5 days to review this new information and is able to cancel the contract if the new information has changed their mind about the property. If you are a seller, I ALWAYS encourage full disclosure because if you don’t and it comes to light after the closing the buyer could potentially sue you for a latent defect that you did not disclose. Therefore, it is always better to be completely honest in this transaction.
6. Breaching the contract – you as the buyer can cancel the contract for no reason outside of the acceptable areas mentioned earlier BUT you will lose your earnest money and the seller could turn around and sue you for failure to perform.
This is a big purchase so you need to enter this transaction with a full understanding of the responsibility that you are taking on.
You might want to check out my video on Contract Mistakes to Avoid if you are thinking about purchasing a home. Please reach out if you have additional questions.