Buying your first home is a major milestone and one you may have spent years preparing for. Both buyers and sellers in New York City want to ensure that the final sale meets their expectations. Sellers want to find a willing buyer who will show up to closing with financing in hand, but depending on the language of the purchase agreement, buyers may have the ability to back out of the deal even at the last minute.
Unmet contingencies can sink a home sale
Most purchase agreements contain certain provisions that allow buyers to potentially back out of the deal. These provisions are known as “contingencies.” A contingency basically states that the buyer will purchase the property as long as certain requirements are satisfied. For example, the sale of a home might be contingent on the results of an inspection or the bank approving the buyer for a mortgage.
The loss of the earnest money deposit
All of that being said, if a buyer backs out of the purchase agreement, they will most likely forfeit their earnest money deposit. Earnest money is a set payment placed when the purchase agreement is made. It is a physical indicator that the buyer intends to purchase the property.
Still, some buyers ultimately decide it is worth losing their earnest money deposit if they ultimately do not want to buy the home. Sometimes they will back out of the deal as late as the final walkthrough. A contingency may go unmet, or the buyer may simply get cold feet.
If you are buying or selling a home, you will want to work with a legal professional who can draft a purchase agreement that will lessen the blow of walking away if you are the buyer or ensure you are fairly compensated if you are the seller, and the deal falls through.