You'd drive by a beautiful home and say "that's the one" and POOF it's yours. Everyone's happy.
In reality, things aren't that easy. Contracts are drawn up, plans are made but sometimes the deal doesn't go through. But when is point of no return after a contract is in place?
Contracts seem to be pretty cut and dry but, in real estate contracts, there can be contingencies built in, by realtors, to protect their clients.
For The Buyers
Their realtor may put in a clause that would protect them if they couldn't get their mortgage or finances approved.
The inspection contingency allows the buyer to back out if the house does not pass the inspection. This is very important for a buyer's real estate agent to include because of hidden faults in the house that could cost a hefty sum to fix.
According to Realtor.com an appraisal contingency allows buyers to walk away if the house doesn't appraise for the agreed upon purchase price.
Insurance contingency is when the seller does not know how much home/flood insurance is for the home. Once the buyer finds out this price and it is too much for them they can back out of the sale.
This is especially important for homes located in a flood zone. You don't want to buy a house, try to insure it and the insurance is upwards of $15,000.
On top of these contingencies the buyers need to make sure they have Home Owner Association approval before the sale can be final. The HOA has the power to approve the buyer.
Contingencies are not set in stone. Your realtor can advise you on the best way to work through the contingency negotiations.
For The Seller
Their realtor will try and keep the contingencies to a minimum because no seller wants a buyer to be able to walk away whenever they wish. A seller should inform a buyer of the HOA and encourage them to apply as soon as possible. This will move things along more quickly.
As a seller, you may want to cancel a contract because a higher offer comes along but be prepared to not get out of the original contract easily. The buyers have the authority on whether or not the seller can get out of the deal. If you push it further and still try to get out of it without their consent they can take you to court.
The best bet for a seller in that instance is to buy the buyer out of the contract.
Remember, don't enter into a contract lightly. After you sign on the dotted line everything will be harder to get out of no matter if you are a buyer or seller.
Weigh all of your options realistically and choose what is best for you.
This is legal binding contract and if you have a good real estate agent then they should be able to explain all of this to you before you enter into it.