Buyers have asked me how or if it’s possible to cancel a Contract to purchase Property. A Contract is a legally binding Document and a Property purchase is a serious decision, of course. A Contract means that a Buyer submitted an Offer to a Seller for purchase of Property and the Seller accepted and signed the Offer, at which point the Offer became a Contract.
Related to the issue of Contract cancellation is a Buyer’s Escrow Deposit. Offering and agreeing to purchase Property includes a required Deposit from the Buyer, a Deposit that’s typically referred to as an Escrow Deposit or Good Faith Deposit. The Deposit is kept in a Bank Escrow Account of a Real Estate Brokerage, Title Company, or Attorney. If the Property purchase is successfully completed, the Deposit is applied toward the Buyer’s purchase. However, if the property Purchase is canceled, it has to be determined to whom the Deposit will be made payable and terms within the Contract specify the outcome.
In order to cancel a Purchase, Buyers are required to provide written notice of Cancellation to the Seller within timeframes that are specified in the Contract.
Reasons for cancellation of a Contract or Offer to purchase property can include, but aren’t limited to, the following items and you should be aware at all times that the terms/requirements of a Contract are specific to that purchase.
- Failed Property Inspection (if Property Inspection is included as a condition of purchase). If a Property doesn’t meet satisfactory conditions, as specified in the Contract, and if the Buyer and Seller do not negotiate agreeable terms regarding the same, the purchase can be canceled within a specified timeframe.
- Inability to obtain adequate Financing. If a Buyer is planning to Finance a Property purchase, applies for Financing, and is declined sufficient Financing by the Lender, the purchase can be canceled within a specified timeframe.
- If the Title Search of the Property determines that Liens and/or other issues exist and that it won’t be possible to clear the issues within a specified timeframe in order to convey clear Title to the Buyer, the purchase can be canceled within a specified timeframe.
- If sufficient Insurance can’t be obtained (“sufficient” as specified within the Contract), the purchase can be canceled within a specified timeframe.
- If a Buyer applies for acceptance to a Condo Association or Homeowner’s Association and is declined, the purchase can be canceled.
- If the Property condition has changed since the time of receiving a Contract to purchase the Property and if the Seller refuses to restore the Property to its’ former condition, the purchase can be canceled within a specified timeframe.
- If a Buyer reviews the Documents relating to a Condo Association’s or Homeowner’s Association’s Finances, Bylaws, Rules and Regulations, etc. and finds them to be unacceptable, the purchase can be canceled within a specified timeframe.
- If the Property is Appraised, doesn’t meet a specific Appraisal value, and the Seller is unwilling to sell at the Appraised value, and the Buyer is unwilling to purchase the property for higher than the Appraised value, the purchase can be canceled within a specified timeframe.
- If a Seller fails to provide the Buyer with documents related to the purchase within a specified timeframe or if the Seller fails to meet other obligations that are specified in the Contract within the timeframe that’s specified in the Contract.
- The Buyer changed their mind, got “cold feet”, wants to get out of the Contract/just decided they no longer want to proceed with the purchase, for whatever reason(s). Most Florida Real Estate Contracts for Resale properties allow Buyers to cancel a Contract within 3 days after it has been signed by the Buyer and Seller and cancellation within this time period is typically without penalty/without loss of Deposit (this period of time is known as a 3-day Right of Recission), however, when purchasing a new Condo directly from a Developer, there is a 15-day Right of Recission, during which time Buyers can cancel the Contract without penalty. Outside of allotted timeframes, Buyers can, of course, still cancel purchases, HOWEVER, they will most likely lose their Deposit (“lose their Deposit” meaning that the Seller will most likely be entitled to keep the Deposit).
If Buyers and Sellers who have a Contract to purchase property can’t reach agreement regarding cancellation of the Contract or other Contract terms, the Contract specifies Legal procedures that are to be followed regarding Dispute Resolution.
Note that in the State of Florida, Attorneys are not required to conduct Purchase Transactions for Property Purchases (Title Companies conduct the vast majority of Property purchase transactions in Florida), however, Buyers and Sellers are advised to seek Legal Counsel if they would like Legal assistance with a Real Estate Transaction. It should also be noted that Real Estate Contract Documents that are used by Florida Real Estate Brokers are Documents that have been structured, reviewed, and approved by the Florida Bar, so the Forms are already Attorney approved.