Investor · Columbia, SC · Member since 2020 · 29 posts · 8 votes
At what point in the escrow process is the buyer no longer allowed to back out of the deal? Or can they technically back out at anytime before the close of escrow? Thanks!
It all depends on the contract language but the reality is a buyer can back out at almost any point. Worst that happens is that they lose (and you keep) their earnest money deposit. On most commercial or large Multifamily the deposit goes hard and at risk earlier in the transaction but on a small residential a buyers attorney could make a number of arguments all the way up until closing and still have a shot of getting their deposit back.
I know this varies by state law, but so long as all the contingencies have been met (financing, inspections, etc,..) they cannot without forfeiting their deposit.
It all depends on the contract language but the reality is a buyer can back out at almost any point. Worst that happens is that they lose (and you keep) their earnest money deposit. On most commercial or large Multifamily the deposit goes hard and at risk earlier in the transaction but on a small residential a buyers attorney could make a number of arguments all the way up until closing and still have a shot of getting their deposit back.
@Mark H. Porter thank you for the response! In general, at any point are they legally obligated to purchase the home for the price they agreed to (by signature on the closing docs)? Or are they tied to the deposit only until COE?
You should have a period on there that they are obligated to meet for appraisals and inspections and then usually a 3-day period to notify you of issues. It really is based on state law so that’s the first place to look.
Theee should also be a check box somewhere on the contract (assuming a full realtor contract) that says in the event of a buyer default they are either liable for actual losses or only the earnest money (most common and certainly the only box I ever let my realtor check when I’m buying.) . Meaning they could refuse to sign at the signing table and only lose their Ernest money.
There’s also usually a final walk through (I do this on the day of the sale.) where they could find problems that they say are new since they signed off on the inspection and so you to fix them or cancel the sale.
@Derek Carroll I understand. It’s not so much “making them buy” that I’m concerned about. I was more so wondering what happens when they sign on the dotted line saying “I agree to purchase this home for “x” amount”, and then decide to back out of the deal. Just seemed odd that they were able to back out so easily, and those documents/signatures were then disregarded completely. Thank you for the input!