Perhaps your client was ecstatic to find the home of his or her dreams in a South Carolina community within less than 15-minutes of his or her new job. There are great schools nearby for the kids, and your client loves everything about the place. A purchase agreement is signed and earnest money offered. Then, all the “happy feels” turn to anxiety when your client realizes that he or she doesn’t want to go through with the purchase.
When can buyers walk away? If they do so, will they lose their earnest money? There’s no cut-and-dry answers to these questions. Every contract is unique, and that’s where you need to direct your client first—to the purchase agreement. Carefully review its terms. There are usually allowances for a buyer to back out of a deal, within reason.
Maybe the client’s new job fell through
It’s not uncommon for people to make plans in life only to experience a drastic turn of events that leads them down an entirely different path than the one they expected to travel. A buyer might have made an offer on a home in the town where he or she was planning to start a new job. Unexpected issues arise, and the job falls through.
Without the job, your client doesn’t need the house. This is an example of a legitimate reason to back out of a deal after signing a purchase agreement.
Did a mortgage loan fall through?
It sometimes happens that a buyer will obtain preapproval for a mortgage loan but fail to secure the loan when the time comes. If a lender issues pre-approval, it means clients have met the current requirements of that particular lender for a mortgage loan at that time. If pre-approval has expired and a client’s financial status has changed, it’s possible that he or she might be denied a loan.
The seller failed to disclose an important issue
Sellers must disclose information regarding their homes for sale, including known contaminants or environmental hazards, title, insurance or other legal issues and any structural defects or damage that exists at the time of the sale. Buyers can walk away from a purchase agreement if they have evidence to prove that a seller failed to disclose such information.
Will clients lose their earnest money?
Earnest money is a good faith deposit that lets sellers know clients are serious about buying a house. In some cases, by walking away from a purchase agreement, a buyer would forfeit earnest money. For instance, if a client waived an appraisal contingency and decides not to buy the house in question after it appraises for a lower value than the offered price, the seller could keep the buyer’s earnest money.
If, however, the seller failed to disclose information or violated the terms of an agreement in some other way, a buyer would be able to walk away from the deal without losing earnest money. Buyers often seek guidance from their real estate agents when they’re considering backing out of an agreement. When you earn your South Carolina real estate license, you must always be ready to assist your clients in making sound decisions.