When Is It Too Late To Back Out Of Buying A House?

Back Out Of Buying A House

Owning a house is a dream for almost everyone and people year in and year out are buying houses. The process of buying a house can be easy and at the same time complex for first time buyers. A lot of research is required and in some cases seeking legal advice is a better solution for prospective home owners. Every buyer should know and understand the buying process and associated contract and its terms so that every decision made is well informed.

Buyers for some reasons may decide to back out of buying a house. In some cases, the process will be easy and no costs attached to backing out. At times the buyer may find it very complex and costly to back out of buying a house and therefore caution should be observed at every stage and all agreements and documentation well understood.

Why Should a Buyer Back Out Of Buying A House?

There are many reasons why buyers may opt to back out of buying a house. Buyers may face financing problems to purchase the house and as a result they are left with no choice but to back out of the buying process. Most of the times when buyers get a house they want they may still continue looking for other better houses while still in negotiations with the current seller. In the middle of the process the buyer may find a better house probably cost wise, size or appearance and decide to back out of buying the house.

Sometimes circumstances may change, for instance the buyer may relocate to another country or city and makes a decision based on that to back out of the buying process. Not forgetting natural disasters that are unforeseen, the home itself may be gutted down by fire or thunderstorm influencing the buyer to back out of buying a house.

When Can a Buyer Back Out Of Buying A House?

As mentioned above, the buyer can back out of buying a house but the process may not be easy depending on the stage of the buying process. Usually the process of buying a home starts with the buyer finding the home. This can be via online searches, drive through cities and search through various media platforms. After the buyer has the funding, he will proceed to make the offer for the house. When the owner accepts the offer, the parties may proceed to arrange for house inspection. At this stage there is no binding agreement between the buyer and seller. Anyone may just pull out of the deal without any issues. It is important to note that making an offer does not automatically create a purchase contract and hence the buyer can still back out at this stage.

When the buyer is satisfied he will pay buyer’s earnest money to show his intent to buy the house. The parties then go to closure stage where the parties sign a purchase agreement. Once the purchase agreement is signed this contract is binding as per terms therein. At this point it may be too late for the buyer to back off due to costs associated. Prior to signing of any purchase agreement, the buyer will need to make sure that all aspects have been looked into and make sure that funding is available to avoid costs associated with backing off at this point. However, the buyer can still back off even at this stage for some reasons but this will hit on his pocket.

Backing Out Without Contingency Vs. Without Contingency

Contingency refers to a set of requirements that should be met for prospective buyer to proceed with buying of the house. When these requirements are not met the buyer can back out of buying the house without any repercussions. The case is different for backing out of buying a house without contingency. The seller may sue the buyer through the courts. The buyer should make sure that he is aware of the contingency terms of the purchase contract so that he is awarded the privilege to back out of buying the house without any penalties.

What Are The Consequences of Backing Out?

Backing out of buying a house by the buyer can be a simple process in the early stages of the buying process and usually the buyer loses nothing directly from that. As long there is no purchase agreement signed, the buyer may back out of buying a house at no cost and the process won’t take time. There is even no need for legal processes or consultation with legal advisers. However, when the buyer decides to back out after the purchase agreement has been signed he will stand to lose a lot especially where there are no contingency terms. The buyer is legally bound to the purchase agreement and backing out will be a violation of the agreement unless any of the terms is violated. The seller has the right to sue him in the courts of law. The buyer will have to pay various legal related fees for his lawyers attending to the case.

Earnest Money Deposit

The most difficult money the buyer would lose without contingency is the earnest money deposit. That initial deposit to show the intention to buy the house is lost when the buyer backs out of buying a house after the signing of the purchase agreement. This money is usually around 3% to 5% of the purchase price of the house which is quite a significant amount. The legal processes involved also may be tedious. In case where the contingency terms have been violated the buyer may back out of buying a house and is entitled to his earnest money payable within a deadline as stipulated by state laws.


Any prospective buyer of a house should know that it is possible to back out of buying a house but there are consequences of taking such decisions under certain circumstances as discussed above.