When You Can Walk Away from a Signed Home Purchase Contract

Answer

Signing a home purchase contract creates a legally binding commitment to buy. However, many contracts include contingencies—specific conditions that allow buyers to cancel the deal without penalty. Knowing these options helps you protect your deposit and avoid surprises.

Common Contingencies and Timeframes

• Inspection Contingency (usually 7–10 days)
  Buyers may order a professional home inspection. If issues surface, you can request repairs, renegotiate, or cancel the contract during the inspection period.
• Appraisal Contingency (often 10–14 days)
  If the lender’s appraisal comes in below the agreed sale price, you can back out or ask the seller to lower the price. Without this clause, you must cover the difference in cash.
• Financing Contingency (commonly 21–30 days)
  This clause protects buyers who cannot secure a mortgage. If your lender denies financing, you can terminate the contract and recover your earnest money.
• Title Contingency (varies by state)
  Discovering liens or undisclosed claims can void your purchase if the seller cannot clear title within the agreed period.
• Home Sale Contingency
  If you need proceeds from your current home to buy, this clause lets you cancel if your sale falls through.

State “Right to Rescind” Rules
A few states grant brief cooling‑off periods for specific disclosures—like reviewing condominium or HOA documents. Check local law to see if you have an automatic rescission window after signing.

Outside these contingencies, canceling a signed contract can trigger penalties:

• Forfeiture of your earnest money deposit
• Potential seller damages or specific performance demands

Before relying on a contingency or considering cancellation, review deadlines carefully and track dates in your purchase agreement. Buyers are recommended to verify exact timeframes with their agent or attorney.

It’s advisable to consult a licensed real estate attorney or agent in your state to understand your contract rights and avoid unintended consequences.