Q: Hey Paul … How many days do I get to back out of a purchase?
A: Now that is an often misconstrued matter. Many people, unfortunately, view the due diligence period (inspection period) as a “free look.” While it is true that a buyer is entitled to a full return of his/her earnest money and freedom from the obligation to continue with the purchase based upon the results of inspection(s) or other material matter (discovery of neighborhood crack house right next door, improper square footage in listing, scary structural or insurance history as reported in the Seller Property Disclosure Statement or insurance loss history report) during the first 10 days of the escrow period, it should not be abused. It’s not really a “free” look anyway if you are shelling out money for inspections. I’ll address the question by examining the buyer protections that are in place regarding the initial inspection period in the standard AAR (Arizona Association of Realtors) purchase contract.
As a protection, the time frame for the inspection period is often slightly misunderstood. The buyer has 10 days from the full ratification of the purchase contract (the day it the contract is executed is considered Day Zero) to provide the seller with notice of his/her intentions. The buyer can (A) move forward with the purchase, (B) decline to move forward based upon a specific objection(s) or (C) agree to move forward provided that the seller make certain repairs. If the buyer chooses option A, he/she is committed to the purchase and the inspection period is over. If option B is selected, the buyer withdraws from the purchase and earnest money is fully refundable (provided the seller doesn’t contest the validity of the buyer’s objection). If option C is selected, the seller has 5 days to respond to the repair demands. If the seller responds in any manner other than full acceptance of buyer demands, the buyer has another 5 days to review upon receipt of seller’s response. The options for the buyer at that point are to either walk away or accept and move forward.
So, like so many things in Real Estate, the answer is that “it depends.” Depending on the choices made by each party, the buyer can actually have up to 20 days to cancel the contract based upon inspection issues.
* Quick point of fact. If the buyer supplies the seller with notice of repair demands prior to Day 10, he/she effectively waives the remaining time left in the initial 10 day inspection period. For example, if the buyer sends repair demands to the seller on Day 5, he/she cannot come back with additional demands on Day 9. And if the seller signs off on the agreement to make all repairs, the buyer is now bound to proceed. *
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Ray and Paul Slaybaugh are not attorneys, just humble Real Estate agents. Please do not be silly enough to rely on any opinions given here for legal advice. Consult with a qualified attorney should you have any legal matter pertaining to a Real Estate transaction that needs to be addressed.