Buyers Backing out of Condo/Townhome Purchases

I recently had a buyer of my condo listing in St Louis Park cancel their offer on the property. My seller and I were both rather disappointed and left feeling glum about the news, however, I felt this would be a good opportunity to discuss the different times a buyer can back out of purchase agreement and still retain their earnest money.

There are several contingencies a buyer can add to their purchase agreement offer on a property and when those issues fall apart, they can cancel their offer with no penalty to a buyer. These contingencies include the ability to obtain financing, an inspection of the property, the sale of another property and even that of reviewing the Home Owner Association documents. Most of the contingencies are fairly self explanatory in that a buyer can cancel their purchase agreement with minimal details in regards to the reason and a seller will be appeased enough to hand the earnest money back to the buyer. For example, when a buyer's offer to purchase is contingent on the ability to finance the purchase and finds out along the road of closing that said buyer can no longer obtain financing; the seller isn't left speculating the exact reasons why. The buyer provides their loan denial letter to the seller, all sign off on the cancellation and the seller moves on to find another buyer. During inspection contingencies, a buyer can back out of the purchase agreement after their inspection has been completed, so long as it's within the timelines stated on their contingency form.  If subject to the sale of another property and the deal falls through, submitting applicable paperwork to the listing agent could be sufficient enough for a seller to release the earnest money funds.  

When a buyer cancels during the Home Owner Association document reviewing period, this can easily lead to speculation on the true reasons for the buyer to cancel. Buyers know there's an association on a property when they look at it, as they've already discussed each particular association for each complex prior to or at the showing of the home with their agent. They also have some knowledge on what the association charges per month and whether or not pets are allowed. Most buyers want to know this info before making an offer so they don't jump into a home if they don't these paticluar details on the home and complex. Every once in a while, a seller has a copy of the Rules & Regulations along with other pertinent info about the association to pass along to a buyer to review before making an offer.  If the association's financing is not in order or up to a buyer's lenders standards, a buyer can cancel their offer using this 10 day right of rescission period.  They can also cancel if they don't like the associations rules for renting out a unit/townhome. 

What seems to get the sellers concerned or left confused is when a buyer is well aware of an associations practices, rules and regulations and uses this contingency as an excuse for other reasons the buyer does not wish to disclose (often personal). As there's little a seller can do to change a buyer's mind, we are left with the feeling that it just wasn't the right buyer for the home. That can be tough to accept and move on, for any person during these tough economic times.

If you have questions about buyer cancellations, do not hesitate to give me a call at 651-203-1769 or write me a note at liz@liznovotny.com.