WALKING AWAY FROM A HOME SALE: WHEN TO CONSIDER IT AS A BUYER
It can be difficult to consider walking away from a home sale when you receive an accepted offer as a buyer; however, there are situations where it may be easier to walk away from a sale in the long run.
THE INSPECTION TURNS UP SOMETHING WRONG
Recently, many have decided to waive a home inspection to make their offer more appealing (21% did not include a home inspection contingency versus 13% in 2019). However, the findings of inspections are one reason you might want to walk away from a sale.
Home inspections are a non-invasive review of the condition of a home done by a qualified individual; they will inspect the electrical, HVAC, plumbing, roof, foundation, attic, and other structures. They are looking for areas that may be in poor or unsatisfactory condition.
The largest benefit of a home inspection is that you’re more likely to avoid costly surprises later down the line. One horror story is of an investor who bought a home without an inspection, and when she started removing some water-damaged cabinets, she found abnormal wiring and extension cords. The previous owner had DIY-ed the electrical in the home, resulting in having to rewire the entire house. She was out an extra $150,000 with all the new wiring and additional work that had to be done.
The inspection allows you the chance to walk away from a deal if something like DIY wiring is uncovered.
THERE IS AN ISSUE WITH THE TITLE WORK
The title is a history of who owned the property, a physical description, and any liens on it. The title company works on behalf of the lender and buyer to ensure that the title is clean. Some potential title problems would be outstanding property taxes, liens against it, or easements.
If there are issues, it can be costly and stressful. It is certainly something you should consider before proceeding with the sale. You wouldn’t want to buy a home and later down the line that someone has claim to it.
YOU REALIZE THAT THE NEIGHBORS OR NEIGHBORHOOD ARE NOT TO YOUR LIKING
When first finding a home you like, it’s easy to be blinded by finding something that meets your qualifications. Then, if you get an accepted offer, rationalizing anything problematic away can be even easier.
However, perhaps after seeing the home at different times, you notice neighbors possibly engaging in activities that bother you (like late-night band practice), or maybe you notice that the neighborhood isn’t particularly pet-friendly and you have multiple pets.
Although it may seem petty in these situations, considering walking away from the sale could be a good idea rather than dealing with neighbors or a neighborhood that is not to your taste.
SOMETHING CHANGES IN YOUR FINANCIAL SITUATION
Sometimes, you might have a chance in your financial situation after putting in an offer for an unexpected reason. In these situations, it might be the responsible choice to walk away from the sale. Also, depending on the change, it might mean that you no longer qualify for financing.
It’s always best to iron out the financial aspect before even looking at homes, but sometimes random things cause unexpected life changes that may make it necessary to walk away from a sale. However, we would never recommend looking to make a significant life change before your closing, as it might affect your ability to get financing.
THE APPRAISAL COMES IN BELOW THE AGREED UPON PRICE AND YOU CAN’T MAKE IT WORK
When buying a home, buyers also can include an appraisal contingency. Appraisals are generally required if obtaining funding from a lender; however, the contingency will allow you to have some negotiation ability if the appraised value comes in lower than the agreed-upon price.
Low appraisals may happen for various reasons, but according to data from Case-Shiller, appraisals came in below 19% of the time in 2021. When this does happen, there are a few remedies:
- Seller reduces asking price
- Buyer increases down payment
- Request a second appraisal (approval not guaranteed)
- Buyer cancels contract
In the last case, where the buyer cancels the contract, it will be due to the inability to compromise with the seller or not being able to increase the down payment. In this case, walking away from a home sale might be your only remedy as a buyer.
OVERVIEW
Although it can be challenging to walk away, in these 5 circumstances, it will likely be to your benefit to consider it. A good real estate agent will be able to help you through the process and advise you as to whether terminating the agreement is a wise choice.
One thing to think about when walking away is the earnest money situation. Earnest money is to show seriousness to the seller, often considered a good faith deposit. The amount will vary depending on the sale but is typically between 1 to 5% of the purchase price. However, walking away from a sale could cause you to lose out on your earnest money.
If you are walking away for the following reasons, you can expect a return:
- The home does not pass inspection
- Home appraises below purchase price
- Home has title issues
- If you are unable to obtain lending
On the other hand, if you walk away because you’ve had a change of heart or due to the neighbors/neighborhood — you shouldn’t expect any return. Although, in some situations, it might be better not to get a return and avoid a problematic living situation down the road.
CHECK OUT OUR RECENT POSTS:
