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Can Buyers Back Out of Real Estate Agreements During the Pandemic?

The COVID-19 pandemic has created unprecedented legal questions, and many are wondering if their real estate contracts are enforceable in light of the current world situation. A real estate sales contract is legally binding, and walking away from it puts the buyer’s earnest money at risk. Does the COVID-19 crisis change this? Here is a closer look at what options buyers have when facing the realities of the global pandemic.

Adding an Addendum to Real Estate Contracts

If a buyer is ready to make an offer on a home, they can add an addendum to the contract. These clauses state the circumstances that allow them, legally, to back out of the deal. These are also sometimes called contingencies. An inspection contingency is a good example of this type of addendum.

For new home or condo purchase agreements, buyers can add addendums that focus on the potential problems associated with COVID-19. This can protect the buyer if the seller comes down with the virus and the house is contaminated. The addendum can also include information about what would happen if either the buyer or seller passes away. Finally, it can contain a clause to help the seller if they experience sudden, unexpected financial concerns due to the pandemic.

Walking Away from the Agreement

If there is already an agreement in place that does not have an addendum, the buyer can either move forward with the purchase in spite of the COVID-19 related concerns, or walk away. If the buyer chooses to walk away from the contract, any earnest money paid becomes the seller’s. The seller can choose to give the money back but is not legally required to do so. Sometimes, walking away and losing earnest money is the best option.

Understanding Force Majeure and COVID-19

Force majeure, also known as “Act of God,” is a clause a real estate lawyer will often include in purchase contracts that let buyers or sellers out of the agreement due to unforeseen circumstances outside of either party’s control. When the World Health Organization named COVID-19 a pandemic, it opened the door to allow it to be a force majeure. Depending on the wording of the contract, this potentially can release both buyers and sellers from the agreement if coronavirus is creating unforeseen circumstances, but the wording of the contract must be carefully analyzed.

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He helps clients resolve issues relating to family law, including divorce, parenting time and parental responsibilities, paternity, and child support. As a skilled real estate attorney as well, Scott also provides advice and legal representation to clients who are purchasing or selling residential or commercial property in Illinois.

Years of Experience: Approx. 30 years
Illinois Registration Status: Active
Bar & Court Admissions: Illiois Courts Northern District of Illinois Federal Courts Illinois State Bar Association Chicago Bar Association

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