How to terminate home purchase agreements and contracts

Please note: Discover® Home Loans does not offer home purchase financing options.

You may be able to terminate some agreements, contracts, and applications as you move through the homebuying process. The rules that apply to your situation can vary depending on your state's laws and other factors. 

Remember, terminating certain agreements, contracts, and applications may come with cancellation fees and penalties. However, these charges may be insignificant compared to the emotional anguish of getting stuck with a home you don't want or working with a real estate agent you don't get on with.

Ending a buyer agency agreement

Sometimes, people just don't work well together. If you find yourself in this situation with your real estate agent, you may want to cut ties.

Your buyer agency agreement, which outlines the terms of the partnership between you and your real estate agent, is usually legally binding for a set period. However, it may contain a clause that lets you terminate this arrangement.

Your ability to cancel may depend on the type of buyer agency agreement you enter and other factors. 

Terminating your mortgage application

If you need to cancel a mortgage application, call your lender immediately and tell them the reason why. Explaining the situation may help the lender understand any future needs.

Depending on your lender, you may still be responsible for certain fees and/or have to pay a penalty for canceling a mortgage application.  

Keep all cancellation documents from your lender in case you need them in the future. 

Walking away from a real estate purchase agreement

Buyers may put in an offer on the first house they like but later decide it isn't the right property for them. At this point, the next step may be to terminate their real estate purchase agreement, which outlines the terms of a real estate transaction between the buyer and seller.

Contingencies

A real estate purchase agreement may contain several contingencies that allow you to walk away from the arrangement under certain conditions. Common contingencies may include:

• Financing: Even if you've been pre-approved for a mortgage by a lender, it's not guaranteed that you'll gain final approval. The lender may not approve the loan, or something may change with your credit or employment situation. If a financing contingency is included in your real estate purchase agreement, you may be able to cancel the arrangement.
• Appraisal: If your appraisal comes in lower than expected, you may be able to cancel the real estate purchase agreement or renegotiate with the seller. Ask your real estate agent to explain your options.
• Home inspection: If a home inspection reveals problems, you can typically ask the seller to make repairs, ask the seller to lower the price of the home, or pull out of the agreement. 
• Sale of existing home: If you need to sell your home before buying another, you may be able to include a contingency in your real estate purchase agreement that reflects this. This may allow you to walk away from the purchase if you fail to sell your home.
  

After the contingencies

Once the time limit has expired on contingencies, you may still be able to back out of a real estate purchase before closing. However, you may forfeit your earnest money deposit to the seller for breaching your agreement.

Before signing a real estate purchase agreement, make sure you understand the homebuying process, research your desired property, and think objectively about your wants and needs. After all, your original goal was to buy a new house to live in — not to walk away from.

When dealing with any real estate agreement or contract, it could help to consult an attorney to determine your rights and help you understand what state laws, regulations, and other factors apply to your situation.