So, you've taken the plunge into the world of real estate, eager to find your dream home or lot and start the next chapter of your life. Everything seems perfect, until it's not. Whether it's a change in circumstances, a hidden flaw discovered during the inspection, or simply cold feet, there might come a time when you want to hit the brakes on that home purchase contract. Terminating a home buying contract is no walk in the park, and it comes with its own set of reasons, ways, and consequences.

Reasons for the Termination

Changed Circumstances

Life is unpredictable, and so are our circumstances. A job relocation, unexpected financial issues, loss of financing approval, or a change in family dynamics can turn your dream home into a logistical nightmare. The once-perfect opportunity might now feel like a world away, prompting a reconsideration of the entire deal or inability to complete the purchase.

Unknown Flaws and Surprises

The initial excitement of finding "the one" can sometimes blind us to potential issues. It's only during the home inspection that some buyers uncover problems like faulty wiring, plumbing issues, hidden structural damage, or the inability to install a septic system or drinking well. These unforeseen challenges can make even the most infatuated homebuyer rethink their commitment.

Cold Feet and Second Thoughts

Committing to a home is a big step, and it's completely normal to have second thoughts. Maybe you're not ready for the responsibility, or perhaps the gravity of the financial commitment has started to sink in. Cold feet can be a valid reason to reconsider, but it's essential to navigate this decision carefully.

Terminating the Contract

Due Diligence Clause

The most common way to gracefully exit a home purchase contract is by leveraging the contingency clause called due diligence. During the due diligence process, the buyer has a set period of time to evaluate the property and make a final judgment whether they want to purchase the property or not. Buyers will typically conduct home inspections, soil testing, and personal reflection to ensure that they are ready, willing, and able to be responsible for the property before final commitment to purchase the property. For a full breakdown of the due diligence process, please click here. 

Legal Advice

When things get complicated, seeking legal advice from a licensed real estate attorney is a prudent step. Real estate laws can be complex and vary by location, so having a legal professional review your situation can provide clarity on your rights and obligations. This step is particularly crucial if the other party is not cooperative or if you're facing potential financial consequences.

Consequences of Terminating

Due Diligence Fee & Earnest Money Deposit

When you submit an offer on a home, you typically include a due diligence fee and an earnest money deposit to show your sincerity in completing the deal. The due diligence fee goes directly to the seller as a payment to take their property off the active marketplace and allow you to inspect the property before purchasing it. The earnest money deposit goes to an escrow account and is held until final closing on the property. If you decide to terminate the contract within the due diligence period, you should get the earnest money deposit returned to you. The due diligence fee is typically non-refundable. If you decide to terminate the contract after the due diligence period ends, you lose both the due diligence fee and earnest money deposit.

Other Financial Repercussions

Depending on the timing and circumstances of the termination, there could be additional financial consequences on top of the due diligence fee and earnest money deposit. For example, if you've already invested in inspections, appraisals, or other due diligence actions, those costs may not be recoverable. It's essential to be aware of the potential financial fallout before making the decision to terminate.

Navigating the process of terminating a home purchase contract is a delicate dance. Life is unpredictable, and circumstances change, but understanding the reasons, ways, and consequences of breaking up with your dream property can help you make an informed decision. Your real estate broker can help you think through these changes, advise you along the way, and renegotiate with the seller to help protect your interests. Remember, buying a home is a significant investment, and it's okay to prioritize your well-being and financial stability.

After years in advertising and marketing, living and working for companies in Georgia, North Carolina, and China, I decided to acquire my real estate license so I can use my established marketing and communications skills to help others and work for myself.

For many people, buying and/or selling their home is one of the most important and most stressful times of their lives. Having an advocate and an agent who has experienced years of corporate marketing, managing teams through challenging projects with tight deadlines, and negotiating complex deals - will aid in the home buying or selling process.

If you or anyone you know is interested in real estate investment, a personal real estate search, or property management, please reach out to me directly - I would love to provide my services to help find your goal property as soon as possible.

Bo Hardegree, NC Real Estate Broker
Espin Realty
[email protected] 
704-748-0958