Once the attorney review period ends, a real estate contract becomes fully binding.
A buyer can still back out, but only under specific conditions written into the contract. At this stage, walking away is no longer a matter of preference. It depends on whether a valid contingency applies and if the buyer follows the contract’s timing and notice requirements.
This is where buyers frequently misunderstand their rights and expose themselves to financial risk.
Financing Problems After Attorney Review
Financing is one of the most common reasons buyers try to exit a deal.
Many assume that if their loan is denied, they can automatically cancel the contract. That is only true if the agreement includes a financing contingency and the buyer has acted in good faith and their attorney has extended the mortgage contingency date.
If a buyer applies promptly and meets the contract’s requirements but is still denied, the contingency may allow termination without penalty. Issues arise when buyers change lenders, switch loan programs, or delay providing documents.
In those situations, a seller may claim the buyer caused the denial and is no longer protected, putting the earnest money deposit at risk.
Inspection Discoveries and Missed Deadlines
Inspection-related exits depend heavily on timing.
During the inspection period, buyers usually have the right to request repairs, seek credits, or terminate the contract if significant defects are found. Once that period expires, newly discovered problems do not automatically create a right to cancel.
If an issue is found after the inspection deadline and was not hidden or misrepresented, the buyer may still be obligated to close.
Buyers often believe that serious defects provide an exit at any stage, but contracts limit when inspection findings can be used as grounds to terminate.
Appraisal Issues and Loan Conditions
Low appraisals and lender conditions create another area of confusion.
If the property appraises below the purchase price and the contract includes appraisal or value-based financing protection, the buyer may be able to renegotiate, bring additional funds, or terminate under the contingency.
If no such protection exists, the buyer may still be required to close at the agreed price. A low appraisal alone does not always justify canceling the contract, even if it complicates financing.
Timing Mistakes Buyers Commonly Make
Contingencies usually require action within a set number of days and formal written notice to the seller.
Missing a deadline or relying on informal conversations instead of proper notice can eliminate a buyer’s right to terminate.
Closing delays are another common problem. If a buyer cannot close on time because the lender is not ready, an extension must typically be agreed upon. Without one, the buyer may be in default even if the delay feels unavoidable.
Consequences of Backing Out Without a Valid Reason
If a buyer walks away after attorney review without a valid contractual basis, the seller may be entitled to keep the earnest money deposit or can sue for damages including the costs of putting the property back on the market, paying the mortgage and real estate taxes and if there is an offer they have to take for less money.
Depending on the contract and circumstances, the seller may also pursue additional legal remedies. What feels like a practical decision to a buyer can still be treated as a breach of contract under the agreement.
Legal Review
Real estate contracts do more than outline the path to closing.
They also define when and how a deal can end. Financing terms, inspection provisions, appraisal language, and notice rules all determine whether a buyer can exit safely or face financial consequences.
Buyers dealing with loan changes, inspection surprises, or approaching deadlines should seek legal guidance before taking action.
The Minchella & Associates Difference
With over 40 years of experience in Illinois real estate law, Erica Minchella has represented thousands of home sellers and buyers, landlords, and commercial and investment property owners.
For more information, schedule a consultation today.
