I want out of the sales contract I signed very recently. Can I get out, and what are my potential liabilities?
Dear Bailing Out: Here in Nevada, the real estate contract used to facilitate a Residential Purchase Agreement or RPA, is governed by the Greater Las Vegas Association of Realtors. The agreement is written to protect the buyer more than the seller.
Our GLVAR 12-page purchase agreement contract is set up for buyers that may (in your case) want to cancel without penalty or liability. The three main outs for a buyer when entering a contract are an appraisal, due diligence period and financing.
Let’s start with financing. The Residential Purchase Agreement clearly states: “This agreement is contingent upon buyer qualifying for a new loan on the following terms and conditions.” So your loan amount interest rate and payment rate specified on the first page of the contract use the terms “not to exceed.” Therefore, if the terms are not met with the buyer’s loan officer, the contract cannot be performed and hence the deal is canceled because the interest rate and monthly payment do not qualify.
The key terms in the financing out are “not to exceed” as well as “contingent upon” so any seller will see that automatically signing and accepting a deal doesn’t mean that the deal is done.
The second opt-out is the appraisal. When a deal is accepted and earnest money is deposited, there is a time frame when an appraisal needs to be done automatically with financing such as a Federal Housing Administration, Veterans Affairs or a conventional loan.
The appraisal is a buyer protection and an opt-out without liability if the result is not satisfactory to the buyer. Cash buyers may also order an appraisal and then opt out if they do not like the results. The other bailout on the second page is that the buyer must sell their residence before they can buy the one they are in contract with. This is not seen much in purchase contracts, but on occasion (I had one myself not too long ago) can tie up the seller’s house.
Usually, the main time buyers bail out is during the due diligence period. The buyer has a specific amount of days to perform inspections, and get certifications and all the information needed in the time outlined. The buyer has the exclusive right to cancel within this time, and any earnest money deposit will be given back to the buyer.
The walk-through period at the very end of the transaction is the last real opt-out for the buyer (usually within three days of closing). If there is damage to the house or it is unsatisfactory to the buyer, the buyer can cancel out and is entitled to the earnest money. Here, the buyer can find fault and cancel out if they don’t want needed repairs performed. So in the end, there are a number of protected sections of the Residential Purchase Agreement to cover buyer beware or buyer remorse situations.
Realtor, Vegas Dream Homes Inc.