What to Know About Backing Out of a Contract
When a Real Estate client desires to break a Real Estate contract, you know the next few days of your life will probably not be too pleasant. It is usually a highly charged emotional event when people are looking to break a contract!
In Massachusetts, we are a two-contract state. When a buyer wishes to purchase a property, more often than not, they will fill out what is known as an offer to purchase contract.
This is later followed up with a purchase and sale agreement with the same terms and conditions as the offer form but spelled out in much greater detail.
The offer-to-purchase contract includes all the significant terms in the deal, including the offer amount, a consideration which is the amount the buyer is putting in escrow to secure the property, as well as the agreed-upon closing date and any contingencies.
Real Estate Contingencies Allow You to Cancel Contract
The most common contingencies include the buyer’s ability to obtain financing and the home inspections that they would like to perform. These include home, pest, radon, well, mold, lead paint, and possibly others.
The typical amount you almost always see for initial consideration on a Massachusetts offer form is $500-$1000. When the buyer signs the purchase and sale agreement, the buyer will typically put a balance of 5% in escrow.
Although this is the amount you see most often, a deposit is always open for negotiations. Sometimes a buyer might not quite have the 5% to put down.
Real Estate agents will change the listing status in the multiple listing service to either contingent or pending when a home has an accepted contract.
Over the course of my real estate career, buyers and sellers have asked me if I can back out of my real estate contract. Different answers depend on who is asking the question (a buyer or seller) and where they are in the transaction process.
Can You Back Out of a Contract?