How To Cancel The Contract to Buy a Home
In Arizona there are multiple different ways buyers can cancel a contract. Here are the 5 main contingencies in the Arizona Residential Purchase Contract that provide buyers the opportunity to cancel buying the home without needing the seller’s approval. The best part, you also get your earnest money refunded!
1. After Your Inspection
As a home buyer in Arizona your first opportunity to cancel is during the inspection period. After you have completed your inspections and had a good look at the property you can reject the property by delivering the Buyer’s Inspection Notice and Seller’s Response, commonly referred to as the “BINSR”. However, to cancel this way you must specify your findings that drove you to cancel. For example, the roof needs to be replaced, or the A/C system is non-functioning.
2. Loan Contingency
If the bank won’t loan you the money to buy the home that you have agreed to purchase you aren’t expected to. The second way a buyer can cancel their home purchase is through a loan denial. Loan Denial is after a “diligent and good faith effort” you are unable to get loan approval. Also, the notice to the sellers must be 3 days before your Close of Escrow or “COE”. However, loan denial cannot be for the following two reasons: inability to get the interest that you wanted, or not having the down payment or funds needed to get the loan. It is also important for you to understand what a “diligent and good faith effort” truly means. Depending on the situation simply applying with one lender may not meet the requirements.
3. Appraisal Contingency
When you are buying a house in Anthem Arizona, one of the most important things to the bank is “what is it worth”. In order to figure that out your lender or bank will order an appraisal of the property. An appraisal is an evaluation done to determine the value of the property, what it is worth. In the event that the appraisal comes in below the purchase price, the contract provides the buyer 2 options. The first would allow the buyer to continue and make up the difference between the purchase price and the appraised value. The second provides the opportunity to cancel buying the home and receive a full refund of your earnest money.
4. Title Commitment Review Period
Upon receiving the Title Commitment from the Title Agency you have 5 days to review all the information given to you. During your review period if you find information, such as deed restrictions, that would effect your desire to purchase the house you can cancel.
Say you are a furniture maker looking to buy your perfect home with a large back lot to build your workshop. However, when you review the Title Commitment you find that there is an easement in the back of the property right where you’d like to build the shop. This means you cannot build your shop and it negatively affects your desire to buy the property. Now you have the opportunity to cancel buying the home, because of the easement.
5. Covenants, Conditions, and Restrictions Review Period
The way to cancel a contract during the Covenants, Conditions and Restrictions, CC&Rs for short, the review period is almost identical to that of the Title Commitment Review Period. The Home Owner’s Association (HOA) will send you a copy of the CC&Rs for the house that you are buying. During your review period if you find information that would affect your desire to purchase the house you can cancel.
A good example of this is if you wanted to paint your house purple. It had been your lifetime goal to own a purple house and you are finally making it happen. Upon review of the CC&Rs you see that they only allow brown, tan, and light brown. Now you have the opportunity to cast your dreams of purple house away or you can cancel buying the home.
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