Can a Buyer Back Out of Escrow in Florida?
December 19, 2023A real estate transaction is a huge deal for all parties involved. For this reason, there are many steps to complete before your decision is set in stone. What does this entail? Depending on how far they're into the process, buyers can't expect to just opt out, but that doesn't mean that the option to quit isn't on the table.
Maybe, your financial savings have been drained after an emergency, or you've randomly found a better deal. Many people simply start having second thoughts after the initial rush of house hunting and purchase offers, feeling more anxious the further they go along with the transaction.
You may be in the uncomfortable position of not knowing the ramifications of such a decision. In many ways, that gap in knowledge is worse than anything else, as the mind can go wild with potential costs and legal battles.
Cancelling a Real Estate TransactionWe know that the prospect of backing out of a real estate transaction can be as nerve wracking as the transaction itself.
The reasons behind your decision are key to determining whether you'll be expected to cover the escrow costs. For one, no one will bat an eye if a buyer backs out after finding flaws in the title. Even if the seller offers to have the title cleared before the closing date, some buyers feel like their trust has been breached by this point. There are also title issues that can't be solved on a short-term timeline, giving people more reason to cancel the process.
One of the main advantages of having a local escrow service on your side is the chance to conduct thorough title searches to rule out major problems before putting your money on the line.
Buyers are also within their right to cancel the process if sellers fail to meet specific conditions in the sales contract. For example, repairs and/or upgrades that were discussed during the property inspection. This also applies when sellers fail to notify the other party about property damage or additional ownership rights.
Other issues that make a transaction fall through include unpaid taxes, pending mortgage claims, or structural elements that go against local guidelines. If sellers choose to omit these details during the initial negotiations, buyers will not feel confident going along with the process after finding out about the problem on their own.
The Aftermath of an Unsuccessful TransactionBuyers can't predict the seller's response. Still, it's natural for sellers to feel that their time has been wasted or that their own commitment wasn't taken into account. If you plan on backing out, keep that in mind so you can avoid conflict while laying down your reasons. Your real estate agent can help you focus your argument so you can quickly rule out any suspicions of foul play.
Most transactions statewide are regulated by a FAR/BAR contract. According to Dalton Wade, this could refer to FAR/BAR "As-Is" Contract for Sale and Purchase and the FAR/BAR Residential Contract for Sale and Purchase (more commonly known as the "Non As-Is" Contract to us agents). This means, that any dispute is followed by a period of mediation before the case is brought to court.
Beyond that, the type of contract determines whether the seller is expected to cover specific costs or make repairs in advance.
The Escrow DepositBuyers transfer what is known as the earnest money at the beginning of the purchase process, right after the escrow account has been opened. This means that you need to deal with these funds if you plan on canceling an ongoing real estate transaction.
The escrow deposit signals that all parties are serious about completing the steps all the way to closing. Because of this, the removal of these funds is not always cut and dry. This is also the reason why some real estate agents recommend to deposit as little as possible.
In these cases, the real estate agents managing the escrow account work as a neutral third party. They only verify that the agreed-upon amount has been transferred on time; they can't make decisions on how the money is split once the process falls through.
Generally, buyers can be refunded without issue when the seller backs out. Buyers can also cancel their offer, but disputes are most common in these cases.
Some ways to avoid an uncomfortable situation:
- Have a real estate lawyer review the contract before putting in your signature. If there's a dispute about the funds in the escrow account, the decision will fall on what's stated in the contract.
- Work with an escrow agent to introduce contingency clauses in advance, namely on your purchase offer. As shown in an article by Capital Bank, you can make your offer contingent upon inspection, appraisal, or financing. This means that you'll be free to walk out of the deal with all your funds if the property's value falls below the established purchase price, if there are undisclosed cases of damage/disrepair, or if you fail to secure financing.
Does any of this resonate with your current dilemma in your house-hunting process? Even if you haven't considered backing out of escrow, it never hurts to know how to navigate that specific scenario.
And if you do have questions about your purchase transaction while already being far along in the process, don't worry. In Key Title & Escrow, you'll find the support you need. Real estate transactions involve many factors, and our experts understand the stress of dealing with all of them at once.
You can trust us with the most sensitive parts of the process, and we can help you validate the information available. Our team will always be honest while helping you reach the best decision. You can call (305) 235-4571 or toll-free at (800) 547-0006 to learn more about our services. You can also contact our specialists via the contact form on this page.