Can A Home Buyer Back Out Of A Deal After A Negative Home Inspection?
Many future home owners enter into home buying with some trepidation towards the possibility for their dream home to “fail inspection,” and want to know their options if the worst should happen. This prospect, like near any house, has both a sunny and dark side, as failing a home inspection is often not possible-although this varies from state to state and whether the loan is a government loan-but paying too much for a home that requires costly repairs, definitely is.
When a home inspection calls for an unwelcome amount of repairs on what was otherwise seen as a dream home, many unprepared future home owners are hard pressed to come up with an answer that satisfies both their needs and the needs of the seller. In these situations the only route is to stop the process and cancel the contract, but what about the deposit?
Being able to see a deposit return when backing out of a home deal is dependent on a few factors that should be understood before the initial offer is even made. Different states have different statutes that govern this aspect of home purchasing, and knowing what your state provides to indemnify you against loss is vital.
All state law tends to favor the buyer, with an emphasis on a “grace period” wherein the contract may be revoked with a full return on any deposit and escrow amount set aside. States are divided between contingency and objection states, where an objection period governs the amount of time you have, and failing to back out before that time period expires leaves a buyer without a returnable deposit.
Contingency states, in a similar vein, allow a contingency period where buyers can back out at any time. Deposits are returnable after this period expires, however, provided the seller did not invoke his right to demand that the buyer’s contingency rights be signed away.
Regardless of state law, individual contracts will vary, and deposit returns may not be possible. Before entering an offer to purchase a home, you should first inform your real estate agent of the total amount that you would be willing to pay for any particular home, including repairs.
This real-world assessment of the cost of owning a home should also include the vision you have for yourself when living in it, as someone who is looking forward to a pristine, hassle free living environment may not be prepared for a full replacement of a major fixture, post-ownership.