While many real estate transactions go off without any significant hitches, there is a possibility a buyer might cancel a contract. In the State of Florida, specific conditions must exist for a buyer to be able to remove their contractual obligation.
‘AS IS’ Sales
A buyer who purchases a property “AS IS” has the right to cancel a contract during the inspection period. This option must be exercised in writing prior to the expiration of the inspection period. It can be delivered by mail, personal delivery or electronic media (emails and PDFs both fulfill the “written” criteria necessary to cancel a contract). Often, a buyer’s agent is the person who sends the seller notice.
Military Members
Military members are permitted to terminate a contract if they receive a permanent change of order (PCS) that brings them a distance of 35 miles or more from the property’s location. To cancel the contract, the military member must provide documentation (usually official orders) to the seller or mortgagor. Another acceptable form of documentation is a written verification signed by the military member’s commanding officer.
Specific Contingencies
In some instances, either party may cancel if the contract includes specific contingencies to allow them to do so. When this occurs, there are usually special steps to follow to activate this cancelation option. Reasons people cancel include but are not limited to:
- Home fails inspection and an agreeable negotiation between seller and buyer to rectify isn’t reached.
- Appraisal doesn’t align with the agreed price, and the seller and buyer cannot agree upon new terms.
- Buyer is denied financing and cannot obtain the money to purchase the home.
- Buyer cannot obtain sufficient insurance to cover the home.
- Title search uncovers liens or other problems preventing the buyer from assuming ownership of the property.
- Property is altered after the original contract is made and the seller refuses to restore the property to its previous condition.
- Buyer is denied acceptance to a Home Owners’ (or Condo) Association affiliated with the property, or buyer isn’t agreeable to Association terms.
- Seller fraudulently sold the property.
Most contingencies have a specific time frame associated with cancelation. Buyers should always talk to their agent about any requirements associated with specific reasons for cancelation. Buyers already in a contract will want to talk to a real estate attorney.
Three Day Cancelation
It’s often acceptable for buyers purchasing property in Florida to cancel within three days of signing a contract for any reason, including “cold feet.” However, the specific reason for cancelation must be stipulated in the original contract. The Florida Realtors’ standard contract form doesn’t automatically contain include this. Buyers will have to ensure a 3-day option is added to their contract before they sign.
A real estate contract is a legal and binding document. Buyers should also understand, they may or may not receive their deposit back depending upon the contractual language used in associated with the reason for cancellation. If you have questions about the legal aspects of your individual situation, you should always consult with your agent and/or a real estate attorney before signing on the dotted line—either as a buyer or a seller.
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