When should you walk away?
It’s very active out there in world of residential real estate right now. In my neck of the woods, the greater Philadelphia region, there are lots of buyers looking for homes. Multiple offers are quite common. With such competition, it might seem foolish for a buyer who is under contract to walk away from the transaction. It does happen, though. When and why? Here are some scenarios:
Especially in a multiple offer situation, you may become caught up in the frenzy of bidding and then feel like you’ve made a mistake. You may wake up the next morning feeling like the price you agreed to is simply more than the value of the property. You may also question some of the terms of the contract that you chose in order to win the bid. For example, you may have waived inspections or appraisal and now find you are not comfortable with those decisions.
Due diligence discoveries
During your due diligence, you might discover information about the neighborhood that affects your interest level in the property. For example, a downward trend in home values or plans for a new commercial building to be built very nearby could affect your decision to purchase. Similarly, your research on schools and or commuting time/method could change your mind about buying the property. Any of these concerns could convince you to walk away.
By far, the most common reason people terminate a contract is inspection issues. Problems with the property itself–a failed septic system, widows requiring replacement, systems at end of life stages, knob and tube wiring, etc. are the kinds of thing an inspection may illuminate. If you feel the house is a “money pit” and fear there will be all kinds of costs you didn’t budget for and repairs you aren’t interested in making, you might choose to terminate the deal. Often, buyers in this situation provide the seller with a “Reply to Inspection” detailing what they’d like the seller to repair or how much of a cash credit they’d like. If the buyer and seller can’t agree, the buyer often chooses to walk away.
Sometimes, sellers come across as aggressive, uncooperative, or, worse, unethical. In this situation, buyers may decide that interacting with these kinds of sellers isn’t worth it. Not only does this kind of seller attitude make the transaction more stressful, but it can have residual effects post-sale. Decide if the seller’s behavior is a reason to cancel the contract. (Note: Buyers may only be able to have their deposit money returned if they terminate within the time frames the contract stipulates, so make sure you understand your financial risk.)