Contract Clarity
7 Buyer Missteps That Can Lead to Default
In Northern Virginia’s fast-paced real estate market, being a prepared buyer takes more than getting pre-approved and choosing your dream home. It requires a clear understanding of the contract you’re signing and the obligations it creates.
Once ratified, the sales contract becomes a legally-binding agreement. Failing to meet its terms, whether through delays, misunderstandings, or inaction, can result in default. That breach can mean the loss of your deposit, legal consequences, and a damaged reputation in a competitive market.
Even well-meaning buyers can make costly mistakes. This guide highlights seven common ways buyers unintentionally breach the contract and how to stay protected.
1. Missing the Deadline to Submit Your Earnest Money Deposit (EMD)
What to Know: After ratification, buyers typically have 3 to 5 business days to submit their Earnest Money Deposit (EMD). This deposit is held in escrow and is credited to the buyer at closing.
How Buyers Default: If the EMD is not deposited into escrow by the contract deadline, the buyer is in default. The seller has the option to issue a Notice to Perform, allowing the buyer three (3) more days to deposit the EMD. If the buyer misses the new three-day deadline, the seller may declare the contract in default and pursue remedies such as retaining the EMD (if one was delivered late) or terminating the contract altogether.
2. Not Closing on Time
What to Know: The contract includes a settlement date, and buyers are required to close by that day unless both parties agree to a new date in writing.
How Buyers Default: Delays due to financing, scheduling, or lack of funds and no extension is granted, the buyer is in breach of the contract.
3. Failing to Apply for or Secure Financing
What to Know: Financing contingencies provide some protection, but once waived or expired, you’re obligated to close, even if your loan falls through.
How Buyers Default: If the loan is denied after the financing contingency has expired, or if the lender delays the process, the buyer is still obligated to close. Failing to do so puts the buyer in default of the contract.
4. Backing Out After Waiving or Fulfilling Contingencies
What to Know: Contingencies like home inspections and Homeowners Association (HOA) document reviews allow for a legal exit. Once waived or expired, they no longer apply.
How Buyers Default: Attempting to cancel after these protections are removed is considered breach of contract.
5. Canceling for the Wrong Reasons
What to Know: Changing your mind, finding another property, or getting cold feet are not valid reasons to exit a ratified contract.
How Buyers Default: If there is no legal basis for cancellation and no active contingency allowing it, backing out is a default.
6. Being Short on Funds at Closing
What to Know: Buyers must bring their full down payment and closing costs, usually via a wire transfer before the scheduled settlement.
How Buyers Default: If the funds are not available or not transferred on time, and no extension is in place, the buyer is in breach.
7. Refusing to Sign Closing Documents
What to Know: Even if all other conditions are met, the transaction is not complete until the buyer signs the closing documents.
How Buyers Default: Failure to sign or attend closing, despite funds and loan approval, is a contract violation.
What Happens If You Default?
The seller has the following options:
- Issue a written Notice to Perform
- If the contract violation is not corrected, declare the buyer in default
The seller may then:
- Keep the earnest money deposit
- Seek reimbursement for costs like title fees or agent commissions
- File a lawsuit for damages
The Smart Way Forward
Missing deadlines or backing out of a contract the wrong way can cost more than a deposit. It can damage your financial standing, create legal trouble, and strain future opportunities. That’s why having a knowledgeable, detail-oriented real estate professional matters.
At Magnificent Manors, we keep buyers fully informed, track every deadline, and advocate for your interests from start to finish, so you stay protected, not exposed. fIf you ever need to exit a contract, there are legal, strategic ways to do it. Defaulting isn’t one of them. Let us guide you down the path to ownership the right way.
Looking to buy in Northern Virginia, Maryland, or DC?
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Marybeth G. Fraser | CEO, MBA, REALTOR®, Licensed in VA, DC and MD
703-472-3808 | [email protected]
