When acquiring a new real estate property, signing a purchase agreement is a significant commitment. What happens if you have second thoughts upon signing on dotted lines? Can you back out of the agreement if, upon closer inspection, the terms of the contract seem less than ideal?
Illinois law generally treats real estate contracts as legally binding documents, so backing out after you’ve signed one can result in some penalties. However, there are some instances when you might have an escape route.
What are your contractual obligations?
Generally, a real estate purchase agreement specifies the rights and obligations of the seller and the buyer. If you’re making a residential real estate purchase, the contract becomes enforceable under the law once you sign the purchase agreement.
This means that, as the buyer, you are required to fulfill your obligations as outlined in the contract. If you back out of the agreement without a legitimate reason, the seller can take legal action against you. This can expose you to significant financial repercussions; you may lose your earnest money deposit.
Earnest money is a good-faith payment you may have made to the seller to express your commitment to the purchase. The seller may retain your good-faith payment as compensation for the inconvenience and lost opportunity to sell to another buyer.
When you can back out without penalty
The good news is that most real estate contracts include some contingencies that may allow you to walk away from the agreements without facing financial penalties. For example, you can back out of the agreement if you’re unable to secure a mortgage within a timeframe specified in the contract.
This offers you the flexibility to back out if you encounter stricter lending requirements or unexpected changes in your financial situation. You may also be able to walk away from a purchase agreement if a home inspection reveals major repair and structural concerns whose costs would exceed a pre-determined amount.
Buyer’s remorse is a common experience that can catch you unaware, especially if you are convinced that a property is the one for you. Suppose you’re having second thoughts about a residential real estate purchase; you can benefit from personalized legal guidance. Appropriate legal feedback can clarify your situation and help you to mitigate any financial penalties.