What buyers should know before making an offer

IMPORTANT NOTE: A real estate purchase agreement is a legally binding contract. The following information is provided for general educational purposes only and should not be considered legal advice. Buyers should consult their licensed real estate agent or an attorney regarding their specific agreement and options.

No one wants to make a mistake when buying a house. A house might be wrong for you due to structural issues, because it would stretch you too far financially or many other reasons. Sometimes you don’t know a house is wrong until you’ve already made an offer and it’s been accepted. Can you back out?

In certain situations, buyers may have options depending on the terms outlined in their purchase agreement. Understanding how contingencies and earnest money typically work can help buyers feel more informed as they move through the homebuying process.

Understanding contingencies in a purchase agreement

Once a buyer and seller sign a purchase agreement, it becomes a binding contract. The contract outlines the conditions under which the sale will proceed and what happens if those conditions are not met. 

Contingencies are conditions negotiated with the guidance of a licensed real estate agent and written directly into the contract. Common contingencies include the following:

• The home must appraise at the selling price or higher
• The buyer sells their current home before the new deal goes through
• The buyer is able to get financing
• The seller must make specified repairs
• The title must be clear and free of liens or ownership disputes
• The property survey is satisfactory and there are no encroachments

When a purchase is canceled according to the terms of an unmet contingency, the contract typically outlines how the earnest money deposit is handled.

Changing circumstances and earnest money

If a buyer chooses not to move forward for reasons outside the agreed-upon contingencies, the outcome is determined by the specific terms of the contract. A licensed real estate professional can explain how these provisions apply in a buyer’s specific situation.

When buyers decide not to move forward

Backing out of an offer on a house may be the right thing to do, even if you forfeit the earnest money. You might feel relief and disappointment at the same time. Before resuming your search for another house, examine the reasons you backed out. This will help you avoid repeating the situation.

Deciding not to proceed with a home purchase can sometimes be the right financial or personal choice.  Before resuming your search for another house, examine the reasons you backed out. This will help you avoid repeating the situation.

When you do find your dream home, turn to us for your home loan. While real estate agents guide purchase agreements, working with a trusted lender early can help reduce financing-related surprises.

All loans subject to approval. Rates, terms, and conditions are subject to change may vary based on credit worthiness, qualifications and collateral conditions.