The process of buying real property involves many steps before closing. There is a lot of paperwork during these steps, filled with contingencies if the buyer or seller wants to walk away from the deal. The reasons and circumstances for voiding the transactions will be unique. Still, considering the amount of money involved and commitment involved (whether it is moving a family or investing in commercial property), the seller and buyer want to make sure they are making the right decision. Sometimes, they will have second thoughts, which may be an acceptable contingency. There may be conditions outlined in the contract that are grounds for voiding the deal.
Reasons for contract cancellation
There are several legal or technical issues that can be problematic:
· Title: The owner cannot transfer the title if it has a lien against it. The lien must be paid or otherwise resolved. If it is an old family property, there may not be a title, which is solvable but also problematic.
· Contingency: The buyer or seller may include certain contingencies to be met before the closing. Examples include passing inspections or the discovery of a substantial flaw that impacts the property’s value.
· Financing: The buyer may want to buy, but they can’t get the necessary financing or the lender objects to the purchase price.
· Disclosure: The seller must share any knowledge they have regarding the status of the property, including a crack in the foundation, asbestos, or potential for flooding. States have varying rules about stigmatization – such as the property was the site of a murder, drug manufacturing or even “haunting.”
· Mistakes: The owner or buyer may not do their due diligence, leading to oversights, such as a change in zoning or the property possibly affected by an eminent domain claim.
· Grace periods: Contracts typically have a clause involving a week or two-week grace period where the buyer can walk away without severe penalty or lawsuits.
Contracts protect both sides
Buyers or sellers can feel anger or frustration because the deal fell through. Sometimes the contract helps them avoid mistakes, and sometimes it can hold the other side accountable for a breach. Honoring contracts help sellers avoid lawsuits after the closing and protect buyers from committing to a property with serious flaws.