Real estate contracts are legally binding agreements. However, as with most contracts, clauses exist to protect each party from being bound to a bad business arrangement. No buyer can void a contract simply because he changes his mind about a property. Buyers can use clauses from the purchase contract to void the agreement as long as the reason for cancellation can be proven.
Financing
One clause that comes standard in real estate purchase contracts is the buyer's right to obtain satisfactory financing. If a buyer is unable to qualify for a mortgage loan, she cannot purchase a home. Additionally, a buyer might have financing but decide that the high interest rate is predatory and void the contract under this clause. Whether the seller must return the earnest money once the contract is voided depends on the language of your contract and the real estate laws in your state.
Inspection
Most contracts include a clause that allows the buyer to bow out of the contract if a professional home inspection is not satisfactory. It is the home inspector's job to find anything in the home that is damaged or needs to be repaired. The home inspection report helps the buyer determine whether the property is a solid investment. If the seller is unwilling to make needed repairs, a buyer may choose to void the real estate contract. When the buyer voids the contract based on unforeseen damages or repairs, he has the right to get a refund on any earnest money deposit.
Fraud
Some home advertisements contain misleading or false information that may cause a buyer to leap at the opportunity to purchase the home before seeing it. If the buyer can prove that the seller fraudulently presented information, the contract is void. The seller should immediately refund any earnest money deposit the buyer paid to avoid litigation. However, if the buyer's claims are incorrect or he misunderstood the seller's listing information, the contract cannot be voided. The seller can make a decision to pursue legal action against the buyer if she has adequate proof of her claims.
Considerations
In many cases, buyers are unable to breach a real estate contract and get a refund on their earnest money. No matter the buyer's reasoning for canceling the contract, the seller shold make sure there is evidence to support his claims. A mere phone call to back out of the contract is not enough. The seller should ask for documentation in the form of a denial letter from a lender, a copy of a home inspection report or information disputed from the advertisement of the property.
