What Options are Available to Buyers When Cancelling a Home Purchase Contract in Virginia?

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Real Estate is a Business of Contracts
Contracts are serious, complex, legal documents and that’s no different when buying or selling a home. In fact, buyers and sellers will be confronted with over 100 legal documents during the process of a typical home purchase and settlement. Exceptional agents have a thorough knowledge of the contracts and know how to write them and manage the process in a manner that protects their client’s best interests, money and possible legal complications.

Caveat Emptor = Buyer Beware
Virginia is one of a few states in the U.S. still operating under the common law concept of Caveat Emptor, meaning “Let The Buyer Beware”. This places the duty of discovering home conditions and defects on the buyer. Sellers cannot deceive or conceal material defects about their home, but in Virginia, sellers have a very limited obligation when it comes to disclosing anything. That’s one of the reasons why an experienced agent is invaluable to a buyer. Exceptional agents are exceptional buyer advocates and their job is to advise and protect buyers in the complicated process of purchasing a home.

Under What Conditions Can a Buyer Cancel a Home Purchase Contract?
When a buyer and seller ratify a contact it becomes a legally binding agreement. Both parties make certain promises to the other in the process of settling the home sale. Essentially, a buyer promises to purchase the home, subject to certain contingencies, while the seller promises to transfer ownership provided the buyer pays the agreed-upon sales price. Nearly all of the performance in the contract lays with the buyer, which is why buyers have various time-specific safeguards to unilaterally cancel the contract. If a buyer cancels the contract in accordance with a contractual right, then the contract is considered void and the buyer’s deposit is returned in full. Most of the cancellation rights available to a buyer are described below.

  1. Home Inspection Contingency – Buyers have a right to perform any inspection(s) they wish during the agreed-upon time frame in the contract (typically 5 to 10 days). During this time, buyers can hire professionals to inspect any part of the home. Basically, this is the time for the buyer to become completely comfortable with the home condition. Buyers can cancel the contract for any reason (or for no reason at all) during the home inspection period, or buyers are free to negotiate repairs with the seller. The only exception is the radon inspection. Buyers can cancel the contract only if the radon level equals or exceeds the EPA limit and the buyer chooses not to have the seller remediate the condition.
  2. HOA/Condo Resale Disclosure Packet – If the property is part of a homeowner’s or condominium association, buyers have the right to review all the conditions, covenants and restrictions (CCR’s) placed on the home by the association. Buyers can cancel the contract for any reason (or for no reason at all) within 3 days of receiving the disclosure packet.
  3. Well & Septic Inspection Contingency – If the home is not connected to public water and sewer, then it will have an on-site well for water service and a septic tank for sewer service. Well and septic inspections are performed separately from the general home inspection. Buyers can cancel the contract for any reason (or for no reason at all) in respect to a well inspection and potable water test. Although, the inspector will need to cite some form of repair, maintenance or replacement before the buyer can use the septic inspection to cancel the contract.
  4. Financing & Appraisal Contingency – More than 90% of home purchases are subject to buyers applying for and securing a mortgage loan. One of the loan conditions required by a lender is the property must appraise for no less than the contract sales price. If the property appraises for less than the sales price, then the buyer can cancel the contract. Otherwise, the buyer is free to negotiate a lower purchase price with the seller in order to meet the appraisal. Additionally, the buyer’s financing is subject to lender underwriting requirements and receiving final loan approval. If the lender determines the buyer is ultimately unqualified for the loan, then the buyer can cancel the contract with written proof of the loan being denied.
  5. Seller Liens, Judgments & Violations – Buyers have additional protections in the contract. For example, if the property is encumbered with a lien(s) or judgment(s) against the seller, then this can impact the buyer’s ability to acquire clear, insurable and marketable title. If the seller does not correct title defects by settlement or as part of settlement, then the buyer can void the contract. Likewise, if the seller has any active violations on the property issued by either the HOA/Condo association or local government, then the buyer can void the contract if the seller doesn’t correct the violations by settlement.

The importance of buyers interviewing and selecting a skilled real estate agent to carefully guide them through the home buying process cannot be overstated. Contracts are complicated legal instruments. Proper agent advocacy protects a buyer from a serious loss of home value, forfeiture of their deposit and even possible legal complications.

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