Sometimes, the process of building a home sounds appealing but does not end up being as straightforward as you expected. There are many upfront costs and expenses that accrue over the course of the construction, and there may be issues with construction that result in its taking much longer than expected.
Your contract should have specific language that states when you can or cannot back out of this contract if you decide that the new construction isn’t right for you anymore. For example, if the builder goes over the required timeline by a certain length, you may be able to back out. You may also be able to back out if you’re willing to give up your initial deposit or change your mind before ground has been broken.
Can you get your earnest money back on the project if you back out?
If you back out, the likelihood of getting your earnest money back is low unless a violation of the contract occurred as a result of the developer’s or builder’s actions. To determine if you may be able to get your earnest money back, think about the following questions:
- Has the market value of the property gone up or down since the project began?
- Will you be able to get a mortgage when the closing occurs?
- Have you asked for any upgrades that need to be paid for?
- How much of the project has been completed, if any?
- When did you sign the initial contract? (There may be a cooling-off period that will allow you to back out of the purchase).
Remember that if you back out of this purchase, you may have to forfeit your earnest money deposit. There may be other options available to you, such as extending the closing or making changes to the construction, which could keep the project on track and resolve any issues you’re having with it.
If you want to back out of the home purchase, the first step is to talk to the builder. Some may be willing to work with you. You may also want to speak with your realtor and real estate attorney to see all the options open to you and to determine if backing out is a reasonable option.