How Binding is the Purchase Contract?

Posted by Purva Brown on July 6th, 2008

The purchase contract, especially when signed by both parties - the buyer and seller - counts as a legal contract and binds both parties to the instructions set forth in it. As a buyer however, there are various contingencies written into the contract that allow you to walk out of the purchase without losing any of your deposit.

These contingencies are:
1. Inspections - if you find anything wrong with the house during inspections, you can back out;
2. Appraisal - if the house doesn’t appraise for the price in the contract, you can back out;
3. Loan - if you can’t get a loan for the house, you can back out.

As a seller, if the buyer is expected to do something, like remove the above contingencies in writing at day 14 for example and does not, you can send them a notice to perform. If after the notice, the buyer still does not perform, you can back out of the escrow.

Disclaimer time! Please don’t take this as legal advice. I’m a Realtor®, not a lawyer. Contact your lawyer for more details.