Let’s say you found the “perfect home” and you’ve signed a contract to purchase it. Then, without warning, something came up; and although you already agreed to the buy the home, you no longer want to.
Perhaps you lost your job or maybe you discovered the home requires excessive repairs—whatever your reason, now you need to find a way to back out of the contract without losing your earnest money deposit.
Luckily for home buyers, Oregon real estate contracts give you the option to terminate a transaction for eight different reasons and still receive 100% of your earnest money back.
Backing out due to finances
1. If you don’t end up qualifying for a loan to purchase the property, the real estate transaction can be terminated at any time. Getting pre-approved for a loan is a good way to avoid this type of thing from happening in the first place, however.
2. If the property doesn’t qualify for the loan, you’re not obligated to buy. Lenders require homes to have things like a roof, siding, foundation and flooring before they will loan you money, and occasionally houses do get turned down.
3. If the home appraisal is less than the purchase price you don’t have to follow through with the contract either. In general, that’s because banks will only loan you the appraised value of the property, anyway.
Backing out due to legal reasons
4. You’re also allowed to terminate the contract if you disapprove of the property’s title report within 5 business days of receiving it. The title report contains information such as the property’s legal description, plot map, liens and more—make sure that information is entirely accurate before you buy, as well.
5. You can even walk away if you dislike the CC&Rs (the neighborhood’s Covenants, Conditions & Restrictions), although you only have five business days to decide that, too. Not all neighborhoods have CC&Rs, but many do. CC&Rs contain information and regulations for the property such as where you can park or what colors you’re allowed to paint your house, and this CAN be a deal-breaker in many situations.
Backing out due to property conditions
6. If the home inspection report of the property fails to meet with your approval, you have 10 business days after signing the contract to back out. Every house is required to have a professional inspection performed before being sold, so you will always have this option to fall back on. You’re also required to provide the seller with a copy of the report if they request it.
7. If the home was built prior to 1978 you have 10 business days to perform a lead-based paint inspection, and you can reject the property if lead paint is found.
8. If you disapprove of the seller’s property disclosure within 5 business days of received them, you’re don’t have to buy either. Property disclosures contain the defects which are known by the seller, and may occasionally contain a surprise or two, although your home inspector will hopefully find these flaws as well.
Your contract may have different time requirements than listed here, so be sure to seek competent legal advice for your specific situation or if you have additional questions or issues.
For Oregonians, feel free to contact us and we’ll put you in touch with a real estate lawyer in your area.
Peter Stewart is a licensed real estate broker in Portland, Oregon as well as a frequent contributing writer for OHM. Please don't hesitate to contact him with any questions you may have about buying or selling a home in the Portland area.