There is a certain amount of nervousness out there about real estate investing and what would happen if one were to cancel a real estate contract. New investors tend to have a lot of questions and apprehensions about the process, the safety of their investment, and so on. Many want to know what would happen if they decided to exit their investment or rescind their offer. What would happen if they backed out for whatever reason?
Yes, it can happen – one’s circumstances can change, one may have to change their job, or one could simply change one’s mind. They may decide that they have to or want to exit. Well, the possible consequences will usually depend upon the stage of the transaction. Typically, an investor will look at homes, speak with the local broker, builders, and so on, and choose a home to buy. (I say ‘builder’ rather than ‘seller’ because I always advise my investors to buy brand new homes. It has always been my considered view that that is a better option than preowned homes.)
The next step is to enter into an agreement or written contract with the builder. At the time, the buyer would typically pay something called earnest money, which could be a few thousand dollars. Parallel to this, an investor would also be in the process of applying for and getting approval for a loan. Usually, the agreement will have a financial contingency clause that will protect the investor in case their loan is turned down.
If a loan is not sanctioned the investor usually has the option to cancel a real estate contract and get a refund of their earnest money. If an investor’s loan was approved they may not be entitled to protection under their contract and they could end up losing the deposit or earnest money.
Now there are many different scenarios that we can envisage and speak about, but this is how things would go down if an investor wanted to cancel a real estate contract or rescind an offer. Since this is something that a lot of our investors want to know about, we will be speaking about the possibility of exiting a real estate investment in our upcoming real estate expo.
We will also be bringing in experts to speak about other relevant aspects of buying rental homes. You are welcome to join us for this free real estate investing event. Simply visit our Events page and sign up for it.