13 Valid Reasons to Terminate a Home Purchase Agreement

Feeling anxious or regretful during the homebuying process is normal. It's a huge purchase that brings high levels of stress and emotion.

Most of the time, those feelings can be worked through. But there are also situations where your stress over the home purchase could be warranted, and it could lead to backing out of the home purchase.

Here are 13 situations where you could eliminate your financial stress by pulling the plug before closing.

Low appraisal

Andrey Popov/Adobe

A mortgage lender will only back the amount that they believe a property to be worth. If the property isn't appraised at close to the sale price, then the deal could be in trouble.

If it's significantly less, the mortgage likely won't go through, and the buyer will have to back out. In some cases, the seller may agree to a lower sale price rather than go through the process of relisting.

Agree-upon repairs were skipped

Yuliia/Adobe

After the home inspection, buyers and sellers may negotiate repairs that must be made by closing or credits that the seller offers instead of fixing issues.

If these repairs are not made, then the buyer has the option to back out since the contract has not been met.

The inspection is worse than anticipated

seanlockephotography/Adobe

You go into the inspection, keeping your fingers crossed that it doesn't reveal any deal-breaking foundation issues or major deferred maintenance. 

On occasion, though, the inspection report will come back far worse than anticipated. Your contract may allow you to back out, depending on the house's condition.

You lose your job

alotofpeople/Adobe

The bank's assessment of your ability to buy a house is based, in part, on your income. If you lose your job before closing, the bank may be unable to vouch that you can pay the mortgage each month. 

And, if you no longer feel comfortable taking on this financial investment, you may have the flexibility to back out.

There are title issues with the house

Anastasiia/Adobe

If the current homeowners don't have a clear title to the home and know who legally owns the home, the buyer has every right to back out.

The last thing you want is someone showing up six months from now claiming the house is theirs.

Boundary lines are disputed

Pcess609/Adobe

When you put the offer on the property, you expected it to match the square footage or acreage that was advertised. 

If you have a survey done during the buying process and it's at odds with what was disclosed, then you may want to reconsider your purchase price or if you want to buy the property at all.

You felt rushed into making a decision

kucherav/Adobe

While you may not have a legal reason to back out, sometimes the only reason you need to back out is that it doesn't feel right.

If you felt rushed into making an offer due to pressure from your agent or theirs, or you jumped on a property because you got caught up in a frenzy, that might be a good reason to back out and restart your search with fresh eyes.

Your old house hasn't sold

arak7/Adobe

Depending on the market, you may be able to include a home sale contingency. This means you'll be able to back out of the sale if your current home doesn't sell.

However, if there are multiple offers in a hot market, this type of contingency generally won't be accepted.

The condition of the house doesn't meet FHA loan standards

Giban/Adobe

Whether your credit is lower than ideal or you can't afford a 20% down payment, Federal Housing Administration (FHA) loans can be great options. 

The only issue is that the house has to meet strict requirements, particularly regarding the appraisal. If the FHA appraiser doesn't think the house meets those standards, you'll have to back out.

You find out updates were made without permits

kerkezz/Adobe

Whenever there are significant structural changes made to a property, from adding another bathroom to adding another story, it's necessary to pull permits.

If you find out that updates were made without getting the proper permits, you may want to rethink this house purchase. A lack of permits could mean that these projects weren't made to code.

You have a major life change

Nicholas Felix/peopleimages.com/Adobe

You never know when the dream job across the country might come up, or you could find out that your parents may be moving in with you. These life changes could dramatically impact the type of house you should buy.

If you're already under contract on a house that no longer meets your needs, you may need to consider backing out.

There are outstanding liens on the property

JoshuAA/peopleimages.com/Adobe

If you find out that there is an outstanding lien on the property and the seller can't get it resolved before closing day, then it may be time to run in the other direction.

Liens on a home will complicate the closing process, and it could be a precursor to more significant issues with the home.

You can't shake the uneasy feeling

StockPhotoPro/Adobe

Sometimes, you don't need a reason to take a break from house hunting. 

If your house purchase is keeping you up at night and you can't seem to shake the anxiety and nerves, then it might be time to back out of the purchase.

This is a case where the money you'll lose is worth the peace of mind.

Bottom line

fizkes/Adobe

While it is possible to back out of a home purchase after your offer has been accepted, there can be consequences.

For example, you could lose your earnest money deposit if you back out of the contract for a reason that is not included in your contingencies.  

Additionally, the seller could take legal action if they believe there were monetary damages as a result of the purchase falling through.

Nevertheless, when you're making the largest purchase in your life, you want to be sure you're comfortable with the result to reduce unnecessary money stress in your life.

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