You’ve made it through all the steps of becoming a homeowner. You’ve waited anxiously until closing day. You’re about to sign all the papers annnnnnd now you want to back out.
When it’s down to the wire, can you back out of a real estate closing? We’re breaking it down based on some crucial steps in the process of becoming a homeowner.
When you’re preapproved for a loan…
You can shop around and look at as many houses as you like. You don’t have to submit an offer on anything just yet! If you find a house you’re interested in but then decide not to go for it, you don’t have to move forward. Keep on shoppin’!
When you’re ready to submit an offer…
This is the part where things get interesting. You have to write contingencies into your offer that provide you an opportunity to back out.
However, you can’t write “I want to back out on closing day if something feels off” as a contingency and expect the sellers to accept your offer. Contingencies are especially helpful for:
- Home inspections. A home inspection might reveal issues you’re not comfortable with dealing with, such as a problem with the foundation. You can write a contingency to get out of a real estate closing if the inspection doesn’t meet your needs.
- Financing. This type of contingency protects you if the bank decides not to help finance the house you chose. It can also protect you if the bank’s appraiser deems the house value as less than what you’re trying to borrow.
- Home sale. Many homeowners want to sell their current house before buying a new one. Include this as a contingency if you’re in this situation.
If you include these contingencies in your offer and one of them comes up, you can still safely back out of closing.
When it’s closing day and something comes up…
Backing out depends on what that “something” is.
If you do a final walk-through of the place and come across something major (think flooding in the basement or severe wind damage to the roof), you might be able to get out of the transaction.
In the event of an emergency (like suddenly needing a surgery), you might be able to postpone the closing, or safely back out if there are other offers and it’d be months before you could close.
If some nagging feeling has lingered, telling you not to go through with this, you can back out but you will lose your earnest money. That being said, losing several thousand dollars in earnest money is still better than being shackled to a massive investment that you want no part of.
Why do you want to get out of closing?
This is perhaps the most important question for you to ask. Suddenly needing to care for your parents, getting a job offer in another state, simply feeling like this is the wrong move — these things happen. However, it’s in your best interest to only go ahead with buying a house when you’ve considered all these options.
No one can anticipate getting cold feet and many emergencies simply can’t be avoided. But since buying a house is such a huge deal, you should fully accept and welcome the prospect of closing from the moment you write an offer.