When is it too late to back out of buying a house? That is a complicated question, because there are different deadlines based on contingencies.
- You can change your mind after signing a contract for a while
- You should back out of a house during attorney review or when a clause is triggered
- After you sign the papers at closing it is too late to change your mind
It is never too late to back out of the deal until you sign the closing documents. Having said that, you should make that decision long before then, unless there is a severe problem that comes up right at the end.
Can You Change Your Mind After Purchasing a Home?
You can change your mind after purchasing a home under certain conditions. There are two windows that give the buyer a lot of latitude to back out of the deal:
- Attorney review – during this period you may walk away, no questions asked
- Home inspection – The buyer may walk away at this point for almost anything they do not like about the property
The attorney review period allows both parties to examine the agreement and decide if they really want to move forward. Often emotions play a big part in the decision, and this gives you a chance to take a breath, look at the details, and decide if you really want the house.
The home inspection provides another chance to go onto the property with a professional to really look at the details of the house. Many people only look at the house a couple of times on five- or ten-minute tours with the real estate agent. Home inspections offers an opportunity for the buyer to perform their due diligence, and it may take a couple of hours or longer. In most cases it gives the potential buyer their only chance to examine the details. Also, the home inspector should be impartial and help the buyer see any problems.
Almost all deals die at three points. The buyer changes his/her mind during attorney review. There is a problem with the home inspection. The buyer cannot get a mortgage. For the first two the buyer has a lot of discretion to back out. As you get farther along in the process, though, it gets much more difficult and costly to change your mind. While there is no point where it is too late to back out of buying a house, it gets significantly harder the longer you wait.
Valid Reasons to Back Out of Buying a House
There are several valid reasons to back out of buying a house. Most contracts have provisions for unforeseen problems, and The Balance gives us a nice list. They include:
- Home inspection
- Mortgage approval
- Buyer’s home sale
There may be other contingencies depending on individual circumstances. The attorneys work with both parties to negotiate each of the clauses. Then, they include them in the executed contract.
How Long After You Buy a House Can You Change Your Mind?
How long after you buy a house can you change your mind is a bit of a moving target. You can back out right up to the closing. That will have significant monetary and possibly legal consequences, but you can do it.
If there is a problem, it is always better to get it done early. Back out during attorney review if you really think you need to. If there is a problem with the structure of the house, then walk away during the home inspection period. These should be the points where you make decisions. Do not put off the decision or you may lose your earnest money or even worse.
When Should You Back Out of Buying a House?
You should back out of buying a house as soon as you feel you need to. The longer you wait, the harder and more costly it will be for you. For instance, if you decide not to buy the house during attorney review, you will not have any consequences. You do not need to have a reason, but you do have notify the seller. Most attorney reviews last three business days after the seller signs the contract.
Next is the home inspection, and you it still may be easy to back out because of an issue you have that comes up during this assessment. However, you must provide the seller with a written reason, and all parties must agree to terminate.
After that it gets progressively harder and more costly to back out. You likely will lose your earnest money if you back out without good cause.
Can a Buyer Back Out After Signing Closing Papers?
If you buy a house from another property owner, you cannot back out after signing the closing papers. Sometimes people get confused because there is a case where you can back out of a non-purchase money mortgage after you sign. For home equity loans, second mortgages, and refinances you get a three day right of refusal.
The Consumer Financial Protection Bureau tells us that the right of refusal allows you three days to think about whether you really want to go forward. You may cancel during this period without any penalty. However, this does not apply when you use the money to purchase a property.
Can a Buyers Back Out After the Final Walk Through?
A buyer can walk out after the final walk through. In fact, it does happen sometimes. Particularly when there are bad feelings between the two parties, issues do come up during the final walk though. In fact, I remember a case where the buyer backed out and got his deposit back.
In this case, the seller took a sledgehammer to the walls, some windows, and even the furnace. The buyer obviously wanted compensation, but the seller refused. Therefore, the attorneys had no choice but to nullify the contract.
These cases are rare, but the final walk through is important to find any problems that were not evident before. However, if you just get cold feet at the last minute, the final walk through will not help you. If you back out without a good reason, you will lose your earnest money. Also, the seller may sue you for damages.
Final Thoughts About When it is too Late to Back Out of Buying a House
Before you sign the closing, papers there is no point where it is too late to back out of buying a house. However, practically speaking, it is too late to get cold feet after attorney review is over. It is too late to back out because of repair issues after the home inspection. While you can walk away right up to when you sign the closing papers, it is not a good idea unless there are other serious problems.