What to know when a contract falls apart

Committing to buy a home isn't just a promise. It's the law.

Real estate contracts are legally binding, explains real estate agent Kenville Prince of Prince and Associates in Bay Shore. "You've agreed to do this transaction," says Prince, who has worked as both a buyer's and seller's agent. "You can't just say, 'I don't want to.' "

That's why it's important to have a good real estate attorney who’s familiar with local laws. "Most deals fall apart because someone hired their cousin, who's really a criminal defense lawyer, not a real estate lawyer," says Alexis Siegel, an associate real estate broker at Douglas Elliman's Port Washington offices, who has worked in corporate tax law.

Yet, even with the best lawyers, contracts crumble. One reason is a low appraisal. "A contract is contingent on that," says Prince. "The deal can fall through if the appraisal comes in short."

Mortgages can also cause problems. "After you get preapproval, your circumstances need to stay the same," says Prince. "Buyers think they can go buy furniture, but you can't do that, because your debt-to-income ratio will change." Quitting a job, even for a better job, would affect the situation as well, he added.

Circumstances on the seller's side have to stay stable, too. "The home needs to be in the same condition as when the buyer made the offer," says Prince. "There can't be a new hole in the roof or a new plumbing issue."

Some extreme circumstances can also void contracts. "If the person responsible for paying for the house dies, the contract could be canceled," Siegel says.

What buyers should know if a contract falls apart

Another offer

"If it's a hot property, then we reach out to the next offer on the table," says Prince.

Just make sure the original contract has been voided, adds Siegel. "You cannot show a house or put a house back on the market with a binding contract in place," she says. "So as an agent, I would make 100% sure that the original contract was voided."

Legal action

It's difficult to get out of a contract, especially if there are no contingencies. Siegel says that there are legal options, but they're complicated. "A buyer can try to try to force a seller to close, and a seller can try to force a buyer to buy," she says. "Attorneys get involved, and a buyer may have to go rent a home."

Back to market

"More times than not, the house goes back on the market," says Prince.

An earlier version of this story misstated that NY State law requires homebuyers to have a lawyer represent them at closing. That is not the case, though it is recommended.