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Can A Buyer Walk Away From A Contract To Purchase A Home?

can a buyer walk away from a contract to purchase a home

Can A Buyer Walk Away From A Contract To Purchase A Home?

After an offer has been accepted on a home a buyer has some options for walking away from the contract and even getting their earnest money back.  Usually those times to walk away and get the earnest money back apply during the contingency periods written into the contract.  A buyer can walk away though at any time from the contract up until the actual signing of all documents at closing.  Walking away from a purchase contract though could result in the buyers losing their earnest money and worse being sued if there were no contract contingency clauses upon which they based their decision to cancel the contract.  This article explores some of the different ways buyers can walk away from a contract to purchase a home and the consequences for doing so.

Walking Away During The Inspection Contingency

One of the typical contingencies included in a real estate purchase contract is the inspection contingency.  In the inspection contingency the buyer is given the right to inspect the property in order to determine the quality of the house.  During the inspection period the buyer can cancel the purchase for pretty much any reason.  For example a single electrical outlet is bad or even a door squeaks, the buyer can cancel the deal and get their earnest money back as spelled out in the contract. The buyer must cancel within the time frames specified in the contract if they are using the inspection contingency. Depending on the market that could be anywhere from a couple of days to a couple of weeks after both the seller and buyer have agreed to the sale.

The buyer can also re-negotiate the purchase price or request the seller repair certain issues found during inspection.  The seller can agree to the price reduction, agree to make repairs or tell the buyer they will do neither.  It is then up to the buyer to decide if they want to proceed with the purchase or cancel the contract if the seller is not agreeing to the buyer requests.

Cancelling Purchase Contract Due To Appraisal Contingency

In an offer where financing will be used to purchase a home an appraisal contingency is a must.  The appraisal contingency allows the buyer to cancel their purchase offer when the house appraises for less than the agreed to sales price.  If a home appraises for less than the agreed to purchase price there are a couple of options.   First the buyer can ask the seller to reduce the selling price which the seller does not have to do but it may be in their interest to do so in order to get their house sold.   The buyer can pay more towards the down payment so that the borrowing ratios are maintained, what that means is canceling offerthe down payment must be increased since the loan amount will be based on the lower value of the home.  The buyer and seller can split the difference between the appraised price and sales price so the buyer only needs to come up with a little more down.  A last option is the buyer can cancel their purchase contract and get their earnest money back.

Cancelling Purchase Contract The Under Finance Contingency

When financing is involved in a home purchase then a finance contingency is strongly encouraged to be part of the purchase contract.  The finance contingency states that if for whatever reason the buyer cannot secure financing to buy a home they can cancel the purchase contract and receive their earnest money back.  Generally there is no time limit on the finance contingency as there is with the inspection contingency.  Even minutes before the actual paperwork is supposed to be signed on closing day if a lender informs the buyer they cannot get a loan the buyer can cancel the contract. While it is rare for financing to be denied at the last minute it can happen and the buyers can walk away from the purchase.

Generally when buyers are working with reputable lenders and not doing anything to jeopardize their loan (like last minute high dollar shopping sprees on credit, taking out a loan to buy a new car, opening multiple new lines of credit) they will know well enough in advance that their loan will be approved.  On the other hand if sellers can prove that the buyers intentionally ruined their credit so they would not have to complete the purchase of a house then it could be possible for the buyers to be sued.  That type of lawsuit being very hard to prove can also be expensive as well so sellers may not be too eager to file the lawsuit.

Cancelling Purchase Contract Without Any Contingencies

As noted above a buyer can walk away at any time prior to signing all the closing paperwork from a contract to purchase a house.  Ideally it is best for the buyer to do that with a contingency as that gives them a chance to get their earnest money back and greatly reduces the risk of being sued. The buyers cancelling simply because of cold feet, found another house, or any other reason they could be subjecting themselves to a lawsuit by the sellers.  While most courts generally will not force a buyer to complete the purchase of a home they do not want, they can require the buyers to reimburse the sellers for their expenses (moving, cleaning, storage…), for time lost while the house is not on the market, and courtroom judgemay even add punitive damages to discourage other buyers from engaging in similar behavior.

So while a buyer can walk away from a purchase contract at any time up until closing, the penalties and expenses for doing so can be pretty high.  So if a buyer is not really ready to buy a home they should not bother visiting homes let alone make any offers they may back out of.  A home is a long term expensive investment.  Buyers should be doing a full analysis on the monthly mortgage expenses as well as additional costs they will be expected to pay to make sure they understand their future budget when they own a home.

Bottom Line

Buyers have a number of different times when they can walk away from purchasing a house after entering into a purchase contract.  Some of the reasons for walking away from the purchase are written into the contract and allow the buyer to easily walk away.  For other reasons though not covered by contingencies the buyer could be subjecting themselves to legal action.

Additional Resources

About the author: The above article “Can A Buyer Walk Away From A Contract To Purchase A Home?” was provided by Paul Sian. Paul can be reached at or by phone at 513-560-8002. If you’re thinking of selling or buying your investment or commercial business property I would love to share my marketing knowledge and expertise to help you.  Contact me today!

I service the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde ParkIndian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.



#1 By Gabe Sanders at 7/27/2019 8:02 AM

Excellent information, Paul. The best thing to do is to make sure that you comply with every word and stipulation of the contract.

#2 By Paul at 7/27/2019 8:06 AM

Agreed and thanks for your comment Gabe!

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