Any buyer can cancel the contract at anytime, but it’s important to understand the limitations of the Residential Purchase Agreement in the state of California.
Unfortunately, after your client writes an offer and the seller accepts the offer, the buyer cannot cancel the purchase contract due to a hangnail and expect things to go smoothly.
When you make an offer on a property, you agree to deposit earnest money in escrow. This is your good faith that you will go through with the purchase. However, the contact also says a few other things:
The contract has a contingency for inspections. Generally 17 days, this is the 17 days from the date of acceptance that a seller has in order to conduct all inspections and make sure that nothing alarming is going on behind the walls, and that the property is exactly as it was perceived to be on the date that the buyer made the offer. If, for example, the buyer discovers that there is a hole in the roof that would be too costly to repair, the buyer may request that the seller repair the hole, provide a credit for repair, or cancel the contract during the 17 day period.
The contract has a contingency for disclosures. Generally 17 days, this is the period in which the buyer can review all of the disclosure statements from the seller as well as any HOA documents in order to be certain that he or she is aware of all of the material facts related to the property. Deaths on the premises, water intrusion damage, and other pertinent items will be disclosed at this time. The buyer may cancel if items arise on the disclosure statement.
The contract has a contingency for loan and appraisal. Generally 17 days, this is the period of time in which the buyer’s lender sends an appraiser to the property in order to be sure that the property is worth the negotiated sales price. This is also the period of time where the buyer must make certain that he or she qualifies for the home loan. If anything arises related to the appraisal or the loan, terms may be renegotiated or the buyer can cancel the contract.
However, if the buyer wants to cancel for some other reason, the buyer may lose his or her initial deposit. Contracts are serious things and cannot be taken lightly. Buying a home is not like buying something at the mall. Agents need to educate their clients on what they may expect if they cancel the contract. You cannot just save your receipt—like you can at the mall—and return the item for a full refund.
Setting appropriate expectations is the key to a successful closing. And, if you need help preparing your BRE compliant file, please do not hesitate to contact the experts at Transaction 911.
