The home buying process can take many different directions. Sometimes that dream house doesn’t turn out to be a dream house at all.
It is beneficial for buyers to understand the home offer to purchase and contract agreements before signing to ensure the process is as straightforward as possible. An informed buyer will remain confident with their decisions, even if they decide to walk away.
What is an Offer to Purchase and Contract Agreement?
The North Carolina Offer to Purchase and Contract agreement is a 16-page document prepared by a Real Estate agent or an Attorney. The contract legally binds a buyer and a seller for the transfer of a specific property.
The significance of offer to purchase and contract agreements lies in the terms both parties agree to perform. Once both parties have signed, each is required to fulfill their contractual obligations.
However, there are several different circumstances in which the buying party may terminate or cancel the contract.
Do You Have to Buy After Signing an Offer to Purchase Contract?
The short answer is NO! A buyer is not legally bound to buy a property just because they have signed an Offer to Purchase Contract.
In North Carolina, there is a period in which a buyer can cancel or terminate the contract for any or no reason. This time is called the Due Diligence period.
During the Due Diligence stage, the buyer should conduct inspections and ensure financing is secure. Some of the most important include:
- Home inspections
- Septic inspection
- Well inspections
- Chimney inspections
- Pest & radon inspection
It is critical that all of the inspection reports are thoroughly reviewed and that the lender has confirmed there are no outstanding conditions that will prevent them from approving the loan. All of these steps need to be finalized before the expiration of the Due Diligence period.
Depending on the outcome of inspections and financing, the buyer should cancel or terminate the contract prior to the expiration of the Due Diligence period.
Steps to Cancel an NC Offer to Purchase & Contract Agreement
If during the Due Diligence period you begin to feel uneasy, make your concerns known to your agent. Buyers should consult with their Realtor throughout the entire transaction and take steps to cancel your NC offer to purchase and contract agreement.
Your real estate agent can guide and help you decide whether or not to back out.
Step #1: Consult With Your Real Estate Agent
Your real estate agent is responsible for confirming everything is completed with ample time for possible negotiations. If additional time is needed, a buyer can request an extension by consulting with their real estate agent.
An extension is not guaranteed and should be presented to the seller before the expiration of the Due Diligence period.
Step #2: Review Your Purchase Agreement
Depending on your concerns about the property or reasons for backing out, your Realtor can offer options to remedy the issues by reviewing your purchase agreement. For example, if a seller refused to fulfill their contractual obligations, it can determine your choices.
Make sure you have reviewed the list of seller and buyer responsibilities prior to terminating.
Step #3: Know Your Contingencies
Because North Carolina is a Due Diligence state and buyers should know their contingencies so they can terminate for any or no reason before the expiration of the Due Diligence period. The only recourse for the buyer is the loss of their Due Diligence fee.
If a buyer chooses to terminate after the Due Diligence period they will forfeit both the Due Diligence Fee and the Earnest Money deposit.
Step #4: Sign the Notice of Termination of Contract Form
After careful consideration, if a buyer chooses to terminate their NC offer to purchase and contract agreement they will need to sign the appropriate NC form and deliver it to the seller. The Realtor will provide the form and serve as a courier to the seller or the seller’s agent.
Possible Reasons to Back Out of a Home Purchase Contract
There are a variety of possible reasons a buyer would want to back out of a home purchase contract. Since each transaction is unique, it is impossible to know which circumstances will apply to every buyer.
Here are a few common reasons home purchase contracts cancel:
- Financing was denied. This can happen if a buyer loses their job, does something to negatively affect their debt-to-income ratio, or hurt their credit score.
- The property did not appraise. If a property’s home appraisal does not come in at value, there are options that can avoid termination, your Realtor can advise if this were to happen.
- Discoveries from Inspection Reports. Depending on what is found in the inspection reports, the issue may be too overwhelming or expensive for the buyer. Hopefully, a compromise will be negotiated between both parties, but that sometimes isn’t enough.
- Another home hits the market that is a better fit. Buyers will need to justify losing their due diligence money and other expenses incurred before backing out.
- Material Fact that was not disclosed. Although rare, some instances have occurred where an important fact about the property or the surrounding area was omitted. An example might be that the property is near a landfill. On the day of your showing you were unaware, but if the wind changes the property is close enough that the odors can be detected. Or some other type of environmental concern. Read an example of the disclosure.