When you sign a real estate contract on the dotted line, you’re likely expecting that it’s a done deal. However, this isn’t always the case. Things often occur between when a purchase agreement is reached and a contract is signed and the closing date that can interrupt a real estate transaction. There are a variety of reasons why a buyer or seller wants to either delay or cancel a purchase agreement after the contract has already been signed. Rhode Island has specific statutes and regulations in place to protect everyone’s rights. Here’s what to know.
As mentioned, there are many reasons why a party may wish to back out of a real estate transaction. For instance, a buyer may run into difficulty with securing financing or a seller may realize that there has been a great increase in the value of their property.
Inspection Contingency Date and Defects
Buyers have an inspection contingency date from the date that the contract was signed by both parties to report any defects.
- If any defects are found prior to the inspection contingency date, the buyer can provide notice (generally 7 days) and cancel the contract without any penalties.
- Alternatively, they can ask the seller to repair the defects, provide closing cost credits, or reduce the sales price.
- The seller can agree to the requests, provide a modified solution, or decline to repair the defects.
- The buyer can then accept the seller’s position, continue negotiating, or cancel the transaction and get their deposit back.
Additionally, many contracts often contain an appraisal contingency clause that allows the buyer to back out of the deal if the appraised value of the property is lower than the purchase price. If this is the case, the buyers will have until the appraisal contingency date.
The Case of Quillen v. Cox
A Rhode Island Superior Court case helps to illustrate what can happen when a party wishes to back out of their agreement. In this case, the prospective buyers of a home brought a breach of contract claim against the seller who had allegedly refused to carry out the transaction on the closing date.
As a state court, this court had the right to grant equitable relief, or the ability to force one of the parties to do something. In this case, the plaintiffs were ready to carry out the transaction and even had the purchase price in escrow waiting to complete it. The Superior Court found that the defendant’s reasons for failing to carry out the transaction on the closing date (he was dealing with a $600 unpaid water bill and the deposit was paid to the buyers’ broker) were not enough and ordered the defendant to complete the sale of the property.
Deals Can, In Fact, Fall Through
While the court in this case ordered the completion of the sale, this isn’t always the outcome. It’s a real possibility that a deal can fall through when the court weighs all of the evidence and finds that the defendant’s reasons are justifiable. Unfortunately, this can result in unexpected additional expenses.
Palumbo Law Helps Those in Rhode Island with their Real Estate Needs
The process of closing on a real estate property can be really confusing and very detailed. If you are looking to buy or sell real estate in Rhode Island, it can be in your best interest to consult with a knowledgeable and experienced Rhode Island real estate attorney who knows the ins and outs of the closing process.
At Palumbo Law, our experienced Rhode Island Real Estate lawyers will walk our clients through the entire closing process and will work to protect your interests. We will ensure that your rights are protected. To learn more or to schedule a free consultation, call us today!