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Backing out of real estate contracts

| Jun 8, 2020 | Firm News |

Purchasing California real estate can be an emotional experience, especially if the property is a new home. However, it is important for both the buyer and seller to remain aware that it is primarily a business transaction. The signing of a purchase contract is evidence of that. However, even a purchase agreement should have contingencies that allow either side to back out of a real estate sale.

For a seller, it can be a devastating turn of events when a buyer backs out of a deal. Nevertheless, certain contingencies allow a buyer to void the sale without risking breach of contract claims. Some common contingencies allow for termination of the sale if the buyer is unable to secure financing or the appraisal comes back considerably lower than expected. Issues with the title, such as discovering outstanding liens, may permit the buyer to back out.

In many cases, the results of a home inspection can determine whether the sale will progress. Revelations of major issues in the foundation, home systems, roof or other areas may be too expensive for the seller to mitigate or the buyer to risk taking on. A solid contract will include an out for these contingencies.

However, disputes over the terms of a sales contract may arise. Whether this involves the misinterpretation of contingencies, disclosure issues or other factors, California buyers and sellers may have a lot at stake when one party does not comply with the terms of a valid contract. Seeking legal advice is a wise move when dealing with real estate matters that could end up costing a considerable amount of money.