What do I need to know before backing out of a Boston condo for sale contract?
Boston Condos for Sale and Apartments for Rent
What do I need to know before backing out of a Boston condo for sale contract?
1. Identify Your Contingency “Outs”
- Home Inspection: Allows you to withdraw if a professional inspection reveals defects. In Boston, buyer disapproval of an inspection report is often “unconditional” if notice is given by the deadline (typically 5:00 PM on the final day of the period).
- Mortgage/Financing: Protects you if you cannot secure a loan commitment by a specific date (usually 21–45 days after signing).
- Appraisal: Allows you to exit if the property’s appraised value is lower than the purchase price.
- Condo Document Review: Specifically for condos, you may have a right to review HOA rules, budgets, and meeting minutes. Some contracts allow withdrawal if these are unsatisfactory.
- Title Search: If the seller cannot provide a “marketable title” (free of liens or disputes), you can typically cancel.
2. Risks of Backing Out Without Cause
- Forfeiture of Deposit: In Massachusetts, damages for a buyer’s breach are often limited to the deposits already paid, which typically range from 1% to 5% of the purchase price.
- Potential Lawsuits: While less common for residential buyers than sellers, a seller could technically sue for “specific performance” to force the sale or for additional damages, such as the difference if they eventually sell the unit for a lower price.
- Reputational and Credit Damage: A breach can affect your reputation in the real estate community and potentially impact your future credit if it involves legal judgments.
3. Key Deadlines and Procedures
- Notice Requirements: Most contingencies have strict deadlines. You must provide written notice of your intent to cancel exactly as specified in the contract. Missing a deadline by even a few hours can mean you have legally “waived” that contingency.
- Right of Rescission: Under specific Massachusetts laws (MGL c. 93), there is a limited three-day window to cancel for certain types of sales, though this rarely applies to standard residential real estate transactions unless they were conducted under very specific circumstances (e.g., in-person meetings for unoccupied properties).
- Release Form: Once a cancellation is agreed upon, ensure all parties sign a written release to formally terminate the contract and address the return of the deposit.
Boston Condos for Sale and the Bottom Line
www.bostonreb.com +1Yes, and because of higher interest rates and a softening housing market, home buyers are continuing to back out of purchase contracts at an elevated rate.
Nationally how many buyers backed out of real estate contracts?
About 64,000 home-purchase agreements were canceled in August, according to a new report from Redfin. That’s equal to 15.2% of home contracts initiated during the month and similar to the 15.5% canceled in July. A year ago, the share was 12.1%.
If you’re considering joining the ranks of those who walk away from a deal in progress, it’s important to know whether it will cost you to do so. Or, if you haven’t yet signed a contract but are nearing that point, it’s worth determining if you can cancel at some point in a way that doesn’t result in forfeited money.
If I back out of a Boston condo for sale contract is my deposit at risk?
Typically, Boston condo buyers provide what’s called an earnest money or “good faith” deposit when an offer is made on a home, although the specifics vary. Depending on the price of the condo the initial deposit on an offer is $1,000 and up. The P&S is anywhere from 5-20%. The deposit is kept in an escrow account. Depending on where in the sale process your deposit could be in danger.
If the seller accepts your offer and you sign a purchase agreement — whether weeks or months before settlement — you can risk losing that deposit if you try to get out of the contract without meeting the terms.
Can Contingencies help protect Boston condo buyers?
Yes. Given the financial risks of a broken contract, it makes sense to ensure the final purchase is contingent upon certain aspects of buying a Boston condo for sale. Common contingencies relate to home inspection, appraisal and financing.
What are some examples of a Boston condo contingencies?
For example, if the inspection were to reveal problems with the Beacon Hill condo that are unacceptable to you, a home inspection contingency generally would mean you can walk away and get your deposit back. A second example, if the appraisal were to fall short of the agreed-upon sale price or you cannot secure a mortgage at a rate or terms specified in the contract, you could back out without losing your money.
Are more Boston condo buyers requesting contract contingencies?
Yes, Boston condo buyers are putting contingencies back in [purchase agreements] … and not giving it all away to sellers like they did in the past when there were bidding wars for Boston condos for sale.
Are higher mortgage interest rates causing Boston condo buyers to walk away from a sale?
Yes, because there now can be affordability issues causing buyers to walk away, especially in new construction, as interest rates rise.
Basically, with persisting supply chain issues affecting construction, new houses are taking longer to complete. This means that the current interest rate available to a buyer ahead of settlement may be higher now than it was before construction started.
Is the Boston condo market still on fire?
After two years of surging home prices, rising interest rates have hit the brakes on a red-hot housing market. The average fixed rate on a 30-year mortgage was 6.7% as of Friday, up from about 3.3% in early January, according to Mortgage News Daily.
The difference a higher interest rate makes can be stark.
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