After months of more demand than supply and frequent bidding wars, the real estate market in New Jersey has started to shift. With the increase in interest rates has come a drop in buyers wanting to get to the closing table.
Some sellers now find themselves in the awkward position of dealing with a buyer who wants to back out of the closing despite having submitted an offer that the seller accepted. Those sellers may need to relist their properties and may not be able to sell them for the same prices they secured previously.
What happens if the buyer cancels the closing?
The seller has to make a decision about relisting the property
One of the most important decisions the seller will make will be whether they want to list their property for sale again or not. With the market softening, some sellers may decide that this is not the moment and may change their plans for the immediate future so that they don’t have to list their homes when the market isn’t as strong.
The buyer could lose their earnest money
When buyers make offers on properties, they typically deposit at least 1% of the offer demount in an escrow account as earnest money. If the buyer cancels the closing and does not have the right contingencies in place in their offer, the seller may get to keep the earnest money. The earnest money serves as compensation for the inconvenience the seller experienced because of the buyer’s change of heart.
Beyond making a claim to those funds, there’s typically little that a seller can do when a buyer decides they no longer want to follow through with a residential real estate purchase. Knowing what happens when a buyer cancels a real estate transaction will help both parties navigate this unusual situation.