What can I do if a buyer backs out of a sale?
Selling or buying a home in New York is always an important transaction. If you’re selling a home in New York, it can sometimes take time to find the right buyer.
But what happens when you think you’ve found the right buyer, you’ve accepted their offer and gone ahead with the paperwork, yet at the last minute, they cannot move forward with the purchase?
The first, and probably one of the most important things for you to know about selling real estate in New York, is that New York has many laws that regulate real estate transactions. Knowing these or working with someone who does, will help make the entire real estate transaction process smooth, as well as help you avoid common pitfalls.
Ideally, in the case of a buyer backing out at the last minute, you’ve worked with a New York real estate attorney to ensure the sales contract has provisions that help protect you if this happens.
Who Gets the Deposit?
When selling your home in New York, it’s customary for an interested buyer to put down a deposit as earnest money, showing their intent to buy. It is important that you require this in your sales contract.
When entering the real estate transactional process, the buyer will have a short contingency period (typically forty-five days) that allows them to condition the sale on the lender’s approval of the mortgage. During this period, if the buyer does not receive the mortgage approval within the contingency period and has acted in good faith in trying to obtain that mortgage, then the buyer will get the money back.
However, if the buyer loses their mortgage commitment after the contingency period has been satisfied, then depending on how the real estate contract is written there is a good chance you will be entitled to keep the original deposit.
Try to Understand What Went Wrong
If a buyer legally backs out of the contract due to a low appraisal it is recommended that you find out why the appraisal came back at a lower amount than the purchase price. It’s always good to try and find out what happened because understanding what happened can help you better sell the house to the next potential buyer. Here are two examples:
Perhaps the buyer fully intended to buy your home, but their financing was not approved due to a low appraisal. A common reason for this is that the asking price is too high. Even if a buyer is preapproved for a mortgage, prior to finalizing the home loan, the bank will send someone to appraise the value of the home.
If the bank sees that the mortgage being requested is above the value of the home, they will either disapprove the loan or ask the buyer to pay the remainder in cash.
Knowing this can help you list the home at a proper price that will facilitate the buyer’s lending process and the real estate transaction.
There can be more reasons as to why a buyer backs out of a sale. The best advice we can give is to ensure you are working with a real estate attorney who is experienced in New York real estate law and real estate transactions. Doing so can help you protect the sale of your home.
Page BreakPrior to entering a contract, a buyer conducts an initial home inspection with a professional home inspector who finds several un-fixed issues that could potentially lower the value of the home during the appraisal process while in a contract. Knowing these issues, you have a chance to fix these issues prior to listing the home again.
To help you avoid such problems, I’ve written a brief article that explains to you how to prepare your home for sale in New York.