Does the contract obligate me to buy?

Question

Learning about the process of making an offer, I've read that you should get a deal on paper by having he potential seller sign a contract.  Does the typical contract hold me to buy the property and at the price offered, or it is more to hold the seller to the price?

What if I make an offer and then can't find the funding?  Or the that I didn't calculate for certain costs that end up making it not such a good deal after all?  Can I as the offering party back out after getting it under contract?  I always thought contracts were a two-way-street.

Carl Millsap · Answer

@Paul Kubin the short answer is yes you can back out of a contract as a buyer.

I don't recommend you enter a contract to "hold" a property. Enter with the intent to buy, remember the seller may miss an opportunity to sell to someone who is truly interested, and the agents may miss out on a commission.

If during your inspection period / due diligence you find something that causes you to change your mind then communicate that with your agent and the seller, it maybe an easy fix.

If you think what you found during due diligence / inspection period warrants a different price then again communicate that with your agent and the seller.

If your financing falls through then you can back out but I recommend you get a pre-approval and know what financial risk you are willing to take on before you sign a contract.

The seller is locked into the price once they sign the contract and they cannot back out of the deal unless the contract expires before you close...in my experience.

Jonathan Bombaci · Answer

Hi @Paul Kubin typically when we're writing up offers for ourselves or for clients we include a inspection contingency and and mortgage contingency. In MA, and CA maybe different, we normally get a 7-10 inspection period to decide if we're moving forward with the deal, backing out, or renegotiating our offer. During that time period you can pretty much back out for any reason. Once we decide to move forward we're committing to doing everything in our power to get financing and close on the deal. Normally you need to apply for a mortgage by a certain date but if you get denied financing or the bank is unable to perform in the agreed upon time period then you can back out of the deal and get your deposits back. At that point in the transaction though you really should be committed to trying to make the deal work anyway you can. You don't want to get in a habit of wasting 1-2 months of your time, the sellers time, and you agents time.

I hope this helps,

Best,

Jon

Aaron W. · Answer

@Paul Kubin When we put offers on properties, we have every intention to buy and ensure we are financially capable of purchasing the property. However, we always include a home inspection and rental property contingency to ensure we get to do our due diligence on the property and confirm the assumptions in our analysis. We always go in with a maximum number and if it goes over that then we walk.

Good luck!

Paul Kubin · Answer

That wasn't mine comment.  It was @Wale Lawal 's.

Alicia Harrington · Answer

@Paul Kubin you mentioned due 90% of your due diligence in your comment when everything that's stated is out of your control.  Inspection, Appraisal, Undisclosed Material Facts, each one of these items listed have to be paid for so what are you saying, pay for these items without putting a contract in?

Paul Kubin · Answer

@Jacob Pereira - I'm in Northern California.  I have no interest in wasting anyone's time.  Trying to do plenty of homework now so that when I'm ready my offers will be solid and serious.

Jacob Pereira · Answer

@Paul Kubin it would help if you added what state you're in. There are lots of contingencies (and honestly the contract is hard to enforce from the buy side), but most states do it differently from one another.

Wale Lawal · Answer

@Paul Kubin

There are 5 or more ways to terminate a contract and its called contingency or clause.

1. Inspection Contingency

2. Appraisal Contingency

3. Financing Contingency

4. Option Period

5. Required But Undisclosed Material Facts.

It's advisable you do 90% of your due diligence before putting any house under contract so you don't waste everyone's time.

You will also be loosing your option fee of you terminate.

You may also lose your Earnest Money Deposit if you terminate after you exhaust some important milestones in the House Buying Process 🏘🏡.

Goodluck and Happy Investing 😊

Jaquetta T Ragland · Answer

@Paul Kubin yes the contract does put you under contract to purchase the home but there are ways to get out of a deal which may result in consequences.

Michael Noto · Answer

What you are basically outlining are contingencies. Two most common are financing contingencies (which you mentioned) and inspection contingency. Within a given timeframe specified in the contract you can exercise your contingencies in order to be let out of the contract . Sit down with an agent and these things can be explained pretty quickly, they are a basic part of purchase contracts.

In regards to financing in general, in order to make things happen you either need money or access to it to make 99% of deals work. Figure out how you are going to pay for a deal before you start actively looking so you know what you are working with in terms of funding. Most people pay for deals by using some kind of financing, which can vary based on the specifics of the deal you are looking to land.

Does the contract obligate me to buy?

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