Buying a home is one of the most exciting things you can do and the buying process can be quite emotional, filled with plenty of excitement and stress. However, what if something just doesn’t feel right? Are you just getting cold feet or is that worrying emotion telling you those yellow (or, dare we say, red) flags should be a deal breaker?
Walking away from a contract is just as big a decision as entering into one, and there can consequences. If you're already past your contingency periods, there's a chance you could lose your escrow deposit, for example. You should never feel trapped in a deal that your instincts are telling you is wrong. Below are 5 signs to help you decide if you should walk away from the the deal.
- The home inspection comes back with too many problems: No home is perfect, and even homes that have been remodeled can still have issues. It is perfectly normal, and often expected, for an inspection report to come back with a few minor fixes. In many cases, sellers are happy to take care of these repairs before closing. Maybe you've even decided that you don't mind putting in some work on your new home to make it exactly what you want.
However, when the repairs start to stack up, you may need to reconsider exactly how much you're willing and able to dedicate to fixing up your new home. It's one thing to repaint, or replace dated flooring. It's another issue entirely where you're looking at rewiring an ancient (and potentially faulty) electrical system, replacing large swaths of plumbing, dealing with mold or termites. Structural problems could turn your dream home into your worst nightmare. Never ignore sagging walls, cracks in the walls or floors, roof issues, or water damage. Mold and termites can also be treated, but the damage is usually difficult to deal with and can be quite costly. If your inspection turns up more problems than you're ready or able to deal with, then maybe it's time to walk away.
- The house doesn't appraise for the loan value: It isn't uncommon for appraisals to come back a little lower than the asking price, especially in active markets. However, if the appraisal comes back and is several thousands of dollars below your loan value, it might be time to start searching again. While some sellers may be ready to reduce the asking price to save a deal, there are others who are simple unwilling (or unable) to let a home go for $20,000 less than what they've already negotiated for. This is especially true in situations where there are multiple offers on a property, and a seller could easily line up another buyer. While it may be reasonable for some buyers to bring some extra cash to closing to cover the difference, it's not always feasible for everyone.
And yes, technically, you could select another lender and have the house re-appraised. However, there's no guarantee that the new appraisal would come back any higher. If you're truly set on the home, you and your agent may find a way to make it work. However, if the number is too low, then you should be prepared to start your search anew.
- Affordability becomes an issue: You've done your prep work. You've sat down with your lender, and you know exactly how much you've been pre-qualified to borrow. You've also set a limit on how much you're willing to borrow and still be able to comfortably make a mortgage payment and pay the rest of your bills every month.
But it's 6 months into your search, and you've fallen in love with a home that is receiving multiple offers. You're in a bidding war, and you've now offered $25,000 more than the top of your price range. You know you're pre-qualified, but can you really swing it?
You should try to keep in mind that buying the house isn't just the purchase of the home itself. There are closing costs to consider, (potentially) repairs and moving expenses, usually. Will you be getting new furniture? If your offer is accepted, will you be able to add those new counters in the kitchen now that you're paying more for the home itself? Maybe you left yourself some wiggle room in the beginning, or the payment for your new home won't dramatically increase at that price range. Only you can know exactly how comfortable you are with a certain price, and only you'll know if you're really able to make it work.
It can be truly difficult to walk away from a home, especially if it's one you absolutely adore. But there are consequences to buying a home you shouldn't. Some of the worst case scenarios include bankruptcy and foreclosure; your credit could be ruined. And never, ever, buy on the predication that you can always sell the home if it doesn't end up working out. Markets are unpredictable, and you may not be able to find the right buyer. If you feel like you really can't swing it, you might need to rein it in and re-evaluate.
- You've made one compromise too many: In a fantasy world, we'd all live in the home of our dreams. In reality, though, we often have to accept that our homes aren't perfect, and aren't always everything we want. Lists of needs, wants, and everything in between are all well and good for narrowing down your search, but you'll need to be realistic about what you can afford. Price will often determine where you live and what you can purchase there. But only you can figure out exactly what will and won't be a deal breaker when it comes to your criteria.
You'll find that as your search continues, one house may have the perfect kitchen, but the backyard is a little smaller than you'd like. Or maybe you'll give up your spa bathroom in order to find a home with a pool. Compromise is important when searching for a new home. However, if you find yourself letting go of your biggest criteria in order to make a deal work, then perhaps that home isn't for you. Trust your instincts, and walk away if you have to give up too much.
- Not everyone is on board: If you're buying a home with another person (or people), it's important for both (or all) of you to be on the same page. If you're buying by yourself, then it's all well and good for you to make key decisions on your own. But if you're factoring in other people, then everyone should have a voice throughout the process. It is helpful to hammer out as much as you can in the beginning, like your financials and your criteria for your new home. Know where you're willing to bend, and where you aren't.
Again, it's only natural to get cold feet at some point in the process. But if any of you start to feel uncomfortable or pressured by yourself, your partner, or anyone else involved in the real estate process, know that you or they have every right to walk away. It may be stressful sometimes, but you should be happy and excited by your purchase. If you're not, you may need to take a step back and re-evaluate the situation.