Can I back out after making an offer on a home?

There are several steps involved in making an offer on a property. To do this properly, you’ll need to:

• Talk to your lawyer: they’ll ensure you’ve done your due diligence, and attached any conditions that you want to the offer before submitting it. This second part is hugely important when it comes to if you can back out or not.
• Confirm your finances: even if you’ve been pre-approved for a home-loan, it’s recommended to check back in with your lender to make sure your ducks are in a row.
• Decide if you want to add conditions to your offer: more on this later, but you can either offer unconditionally from the get-go, or stipulate that certain things have to happen for your offer to become unconditional.
• Understand the sale and purchase agreement: this is an important document that your solicitor needs to take you through.

Okay, this is probably the most important thing you need to understand when it comes to working out if you can withdraw from an offer you’ve made on a home:

If you’ve made an unconditional offer on a property in NZ, it’s almost impossible to back out. These offers say that there are no strings attached to your offer. In other words, there’s nothing that either you or the seller needs to do for the sale to happen, and there’s a legal requirement for you to go through with it, as the buyer.

Both buyers and sellers can attach conditions to a property sale. Common seller conditions include:

• Closing date flexibility: to enable them time to find a new home.
• Possession after closing: the seller might ask to be able to remain in the home for a while after the sale closes. This is sometimes referred to as a rent-back agreement.

Common buyer conditions include:

• Home inspection contingency: this would mean the sale is contingent on a satisfactory professional home inspection. If significant issues are discovered, you could negotiate for the seller to cover any repairs, or back out of the sale.
• Home value appraisal: you might decide you want a second opinion on the value of the property. Again, if this isn’t what you’d expected from earlier valuations, you may be able to back out.
• Sale of current home: you might stipulate that you must sell your existing home before proceeding with the purchase.

If you have put one or more of these conditions in place, and the seller (or the property) fails to meet them, you have good grounds to be able to withdraw from the purchase. Importantly, you can’t just use conditions as a get-out-of-jail-free card. For example, if you attach a condition stating that you need to sell your home first, and this happens, then you simply change your mind on buying the new property, this isn’t going to fly.

Equally, if you initially attached conditions, and you and the vendor agreed and signed that these conditions have been met (for example, repairs have been made), the property is now unconditional, and it will be much harder to withdraw from the purchase.

It’s worth knowing that nearly all offers made at property auctions are unconditional from the moment they’re made.

You might have noticed that, earlier, we described unconditional property offers as almost impossible to back out of.

What we mean is that, if you do try to withdraw from an unconditional offer, you’ll face significant financial penalties. Exactly how much this is will be specified in the sale and purchase agreement. The costs might include footing the bill for both the seller’s and your own legal/conveyancing fees, as well as costs incurred by both parties regarding inspection and valuation fees.

In other words, it’s likely to cost you a lot of money to withdraw from an unconditional offer, which isn’t surprising when you think that such arrangements are designed to be legally binding. All of this should serve as a reminder of just how important it is to be sure of what you’re doing before making any offer on a home.

*We hope this article has provided some helpful information. It's based on our experience and is not intended as a complete guide. Of course, it doesn’t consider your individual needs or situation. If you're thinking about buying or selling a property, you should always get specific advice. Anyone thinking about withdrawing from a property purchase should seek legal advice.