Whether you are a long-time homeowner or purchasing your first home, getting an appraisal is critical in knowing how much the home is worth before you pay the asking price for it. Up Next: Examples Of Common Closing Costs Here are six reasons why you need a home appraisal before buying or selling a home:
What Are the Consequences of Breaking a Real Estate Contract?
When you enter a real estate contract, you have a due diligence period to take advantage of backing out of the contract without any consequences. But what if you break the contract after the due diligence period has expired? By design, real estate contracts aren’t supposed to be easy to break. After all, if they were, then they’d be useless as anyone would not honor the deal. Here’s what you could expect if you break contract:
If You’re a Buyer…
If you are a buyer and break the real estate contract, then you may:
- Have to pay the seller ownership expenses like mortgage payments, maintenance, and taxes
- Lose the deposit you put on the home & any other money spent on the home
- Be sued by the seller for breach of contract
All real estate contracts should have a dispute resolution process in it that will help both buyers and sellers reach an accord without going to court.
If You’re a Seller…
Whereas, if you’re a seller and you break the contract with your buyer (for example, you refuse to sell after all is said and done) then you could be subjected to the following:
- Returning the earnest money the buyer gave you when they entered into negotiations with you
- Be forced by the buyer to go through with the sale
- Being sued by the buyer for breach of contract
If the buyer is keen on going through with the sale, then you can simply renegotiate the contract and go through with the sale. If the sale doesn’t go through, you could also be sued by the real estate agent for lost commission and time.
Avoiding Consequences for Breaking Contract
There are ways you can break a real estate contract without consequences. For one, never sign a contract without reading it thoroughly & without understanding.
Secondly, you can add in a contingency clause where specific criteria must be met in order for the contract to be binding. If these criteria aren’t met, then parties can back out with no consequences. A criterion could be if an inspector inspects the home and finds something wrong with it, then the contract can be cancelled. Talk to your real estate agent and an attorney about contingency clauses that are easy to understand for all parties.