The purpose of any contract is to force all parties who have signed the contract to comply with its terms. This means that once you have signed a contract, you can no longer renege on the promise you have made to the other signatory, at least not without being subject to penalties. Contracts are a safety device for both parties. Contracts can help you make sure you get the custom bike you want and not a cheap knockoff. But they can be a pain if you want to break a promise. Here are some of the consequences you might face if you break a real estate contract.
There are two very common types of real estate contract that you may be asked to sign when you're buying or selling a house, and each one comes with its own set of penalties when they are broken. These penalties are contained in clauses, which someone might describe as "if thens." For example if you decide not to go through with the terms of the contract, then you will have to pay the price. The penalties might be different depending on your reason for breaching the contract.
The first type of common real estate contract is the one you sign with your agent. When you hire real estate agents to sell your house, they want to know that you're not going to hire another agent to compete with them or sell your own house and make all their work useless. Therefore you will have to sign a contract that prevents you from doing these things. The penalty for breaking this type of contract is usually that you have to pay all or part of the commission anyway. Additionally, you may be blacklisted, which would prevent you from hiring another realtor in the future.
The second common type of real estate contract is the one signed by buyers and sellers after an offer is accepted. It requires one party to buy and the other party to sell the property unless the conditions (such as passing the inspection) are not met. If you cannot get the money because you owe big money, this is not a breach if you have put financing into your contract. If you haven't, you could lose the property, lose your deposit, or even be taken to court for damages.
Click here to see a sample of a listing agreement.
The best way to deal with a contract, whether it's a real estate contract or an exclusivity agreement with a cell phone company, is to work within its parameters. If you want to break it, find a condition that has not been met. In lieu of that, many contracts must be renewed after a certain period, so waiting is another option you can exercise.