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If you've made an offer on a home that was accepted, you're probably pretty excited about the prospect of moving into your new place. In fact, you may already be decorating the house in your mind and picturing your life there.
But it's important not to get carried away just yet. An accepted offer means there's a pretty good chance you'll get to closing, but there are some circumstances where it may actually not make sense for you to go forward with your purchase.
In fact, there are three big reasons you may want to walk away from the deal even after you've got a signed contract.
1. The inspection reveals major problems
In most cases, a contract to buy a home will have a clause giving you time to inspect the property. The purpose of this is obvious -- you don't want to purchase a home only to find it's structurally unsound, the electrical wiring is unsafe, or there are other major issues not visible with a quick walk-through.
After your inspection, you'll get a detailed report about any issues it turns up. If there are big and expensive problems, or complications you aren't sure can be fixed, you'll have a few options. You can raise the issues with the seller and ask for them to make repairs or drop the price so you can do so. Or you can walk away.
If the seller isn't willing to work with you or you aren't comfortable with the problems that the inspection revealed, it's better to end the deal. You don't want to purchase a money pit that you'll ultimately regret. Typically, your contract should allow you to do that without losing any of your deposit money, as long as you included an inspection contingency in your offer.
2. The appraisal comes in way too low
If you are securing a mortgage to buy the property, the home will have to be appraised before you can complete your transaction. That step is necessary because your lender wants to make sure the home is worth enough to act as collateral for your loan.
Unfortunately, there are times when a house appraises for much less than you offered to buy it for. If that happens, it can make it difficult or impossible to secure financing since it could affect your loan-to-value ratio. You'd likely have the option of making a larger down payment so you don't end up borrowing close to (or above) what the appraisal shows the house is worth. But you may not want to do that if your appraisal shows you're clearly overpaying for the home.
If your offer included a financing contingency, you should be able to walk away from the deal without losing your deposit, as long as the low appraisal affects your ability to get a mortgage loan (as it almost assuredly will).
3. A title search reveals serious issues
Before you buy a property, a title search will be performed to make sure that it has a "clean title." That's just a legal way of saying that the sellers actually own the property they are selling you and that there aren't any other claims on it, such as tax liens or border disputes with the neighbors.
If a title search reveals other claims on the property, you may decide you aren't comfortable going forward with the transaction. This might include a lien on it or an unexpected easement allowing the neighbors access to a large part of it. You don't want to buy a property only to inherit a heap of problems such as debts attached to it or neighbors that can come and go as they please.
Again, provided your offer contract was written with appropriate contingency clauses, you should be able to walk away from the deal without losing your deposit. That's assuming the sellers don't correct the title defect.
It's not fun to abandon a house that you've probably started to imagine as your own. But you don't want to purchase a heap of problems. If the serious issues above arise, your best bet is often to simply end your contract. Then you can find another home that doesn't have such major liabilities.
