No Right to Cancel for Buyer's Remorse

No Right to Cancel for Buyer's Remorse
By K. Michelle Lind
Posted: April 2003 ~ Reviewed December 2004

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MY AAR

INTERNATIONAL REAL ESTATE

You've spent months looking for a new home, comparing neighborhoods and narrowing down the alternatives. Finally, you make your decision and submit an offer to buy the home that is just right for you. But once the seller accepts your offer, you start to worry. Can you afford this home? What about the property taxes and utilities? What if you lose your job? You feel like you want to cancel the contract now - to have a little more time to think. This common response to buying a home is called "buyer's remorse." You have probably made the biggest financial commitment of your life and it can cause anxiety.

Fortunately, feelings of "buyer's remorse" are usually short-lived and the excitement of buying a new home returns. Since the advantages of homeownership far outweigh the disadvantages, most buyers quickly realize that the financial commitment is also a good investment in the long run.

Some buyers believe that they have a three-day cancellation period by law to cancel a contract to purchase a home - but no such law exists. The only rights are those that are written in the contract. In the most common home buying contract, the Arizona Association of REALTORS® Residential Resale Contract ("Contract"), a buyer can generally cancel only for the failure to qualify for financing after a diligent and good faith effort or based on the disapproval of some aspect of the home during the specified time periods.

During certain time periods, the Contract allows a buyer to give written notice to the seller of any items reasonably disapproved, cancel the Contract and receive a refund of the earnest money. If the buyer provides the seller with an opportunity to correct the items disapproved and the seller can't or won't correct the items disapproved, the buyer again has the option to cancel the Contract.

The items in the Contract giving rise to a buyer's right to cancel are:

The title commitment report from the title company (which may indicate liens, unpaid taxes, easements restricting the use of the property)
The Seller's Property Disclosure Statement
Notice of violations of building, zoning, fire, or health laws
Homeowner's association disclosures (such as the restrictions contained in the CC&Rs or other governing documents)
Swimming pool barrier law compliance
Lead based paint information (for homes constructed prior to 1978)
Termite or wood infestation reports
Flood hazard designation (resulting in the cost of flood hazard insurance)
Information obtained from the home inspection and investigation (which may reveal adverse property conditions)
Cost to repair any septic or other waste disposal system
Damage to the home exceeding 10% of the purchase price (by fire, flood, earthquake or act of God)

However, if a buyer attempts to cancel the Contract solely for "buyer's remorse," the buyer is in breach of contract. The seller would then be entitled to request mediation, file a lawsuit for monetary damages, retain the buyer's earnest money as damages, or even ask a court to order the buyer to purchase the property.

Using a REALTOR® in your home search will reduce the chance of suffering from buyer's remorse. Your agent can help you evaluate your needs and make sure the home you've chosen will be a good investment. The right REALTOR® can assist you in finding the right home and getting through the anxious times.

K. Michelle Lind, Esq.
Michelle is general counsel to the Arizona Association of REALTORS® (“AAR”) and a State Bar of Arizona board certified real estate specialist. She serves as the primary legal advisor to the association, provides legal direction in the development of standard forms, is involved in legislative advocacy, and assists in the association’s educational efforts.
Please note that this article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.



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