Portrait of a real estate agent consulting a mature couple at office

Buyers and sellers may have more flexibility with real estate transactions during the coronavirus pandemic. (Getty Images)

The goal of any real estate deal is for all parties to come away happy – whether it’s the home seller pleased with the profit, the buyer excited to start life in a new home or the real estate agents satisfied with the clients' success and commission.

But what if, before that deal closes, it doesn’t feel right anymore? Especially as the COVID-19 pandemic leads to widespread economic uncertainty and expectations for a recession, many people who may have felt confident in buying or selling a home a few weeks ago may now feel worried about a major change.

“No contract in the country will contemplate for a pandemic of this nature, so off the bat, there will likely not be a clear out in the contract for a pandemic or health issues,” says Pierre Debbas, partner and founding member of law firm Romer Debbas LLP in New York City.

Whether the deal doesn’t seem quite as good as before or quarantine measures mean you need to stay where you are, there are opportunities to back out of a real estate contract. With the right contract contingencies and clear communication with your real estate agent, it’s possible to emerge relatively unscathed – as long as you don’t wait too long.

[Read: What to Do if You Can't Pay Rent During the Coronavirus Pandemic]

Here are seven scenarios that make it possible to back out of a real estate deal:

  • Before you’ve gone under contract.
  • When loss of income makes you ineligible for financing.
  • When the house appraises for less than the sale price.
  • When the inspection reveals significant problems with the house.
  • If the buyer’s house can’t sell, the seller can use “kick-out” clause.
  • If you've worked in a "coronavirus contingency."
  • When you're willing to forego some of your deposit to split amicably.

Loss of Income Makes You Ineligible for Financing

If you’re one of the millions of Americans who find themselves suddenly without work during the pandemic, getting a new mortgage won’t feel like the best idea, and your lender will agree with you.

If you’ve lost a job since you were preapproved for a mortgage and are now in the underwriting process to be approved for the loan, you are required to report the loss of employment, and the lender will almost certainly decline the loan for now.

Because financing issues are a major hurdle in a real estate transaction normally, this is a common place where deals fall through.

With 6.6 million Americans filing for unemployment in the last week of March, according to the U.S. Department of Labor, this isn’t something you could have predicted before the pandemic. Debbas notes that the mortgage lending industry had billions of dollars of loan commitment letters throughout the country that, thanks to the explosion in unemployment and other economic woes, are now worth nothing.

You’ll simply want to wait to start shopping for a home again until you’ve regained stable employment and recouped any loss of savings you may have between jobs.

[Read: ]

Inspection and Appraisal Issues

Many home purchase contracts include the contingency that the buyer (and lender) must be satisfied with the inspection and appraisal, the results of which could lead to further negotiations.

It's possible for a property to appraise for lower than the agreed-upon sale price due to bidding wars or a seller's elevated asking price. When that happens, the buyer and seller must come to an agreement on how to proceed: Either the buyer pays more out of pocket or the seller agrees to come down in price. If no agreement can be reached, the buyer will choose to walk away from the deal.

In the pandemic, some lenders are changing their policies for appraisals. Wells Fargo, for example, is not having appraisers go inside the property to maintain physical distancing, using only an exterior inspection and property information through public record and online to complete the appraisal.

It’s unclear if this makes appraisals more lenient or strict, but it may lead to issues down the line. “I can’t imagine how one does an appraisal without an interior inspection, because the condition of the property (interior) makes all the difference in the world,” says Annemarie Stephens, associate broker with Coldwell Banker Residential Brokerage in the District of Columbia.

Similarly, a home inspection that reveals more issues than anticipated could leave the buyer less than excited to call the place home. If you’re not comfortable paying for major changes, or if the seller is unwilling to make repairs prior to closing, you can walk away from the deal.

Stephens says she’s still seeing home inspectors enter the property, but they’re conducting the inspection solo – the buyer or real estate agents that would normally attend as well are asked not to attend, and questions can be fielded by phone or email afterward.



'Kick-Out' Clause

It’s common for a real estate contract to guarantee the sale, contingent on the buyer’s ability to sell his or her current home or even the seller's ability to find a new one. As the coronavirus pandemic continues, many may struggle to find the right home or buyer in the current housing market.

For health purposes, a seller that has an alternate place to stay while her house is on the market also reduces the chances of contracting the virus from anyone who enters the home. “Most of the listing agents are trying to strongly advocate for their sellers to vacate the house already,” says Kristin Winter, a real estate broker with Live West Realty in Boulder, Colorado.

For protection in such conditions, the other party can protect his or her best interests with a "kick-out" clause. Typically used when the buyer must sell an existing home before purchasing another, this clause allows the seller to continue showing the home while the buyer's home is listed. If the seller receives a better offer, the original contract can be terminated.

Coronavirus Contingency

To more directly address the COVID-19 pandemic in contracts, buyers are now incorporating what many are referring to as a “coronavirus contingency,” which allows a bit more leeway should the pandemic interfere with a home purchase.

In some cases, the contingency is focused on funding – if the bank can no longer fund your loan solely due to the pandemic, the contingency would allow you to get your deposit back, Debbas says.

Debbas adds that these contingencies are going into every real estate deal he’s working on now – even in a case where the seller is the developer of a building under construction. “Developers never agree to contingencies, in good times or bad, and the developer agreed to this contingency,” Debbas says.

Stephens says she hasn’t had to incorporate a coronavirus contingency yet, but her colleagues who are aim to “give the buyer a little bit more leniency if they want to walk away.” In Winter’s experience, the clauses make it easier to flex the closing date or key exchange in the event of stricter government mandates or if someone becomes ill and can’t move immediately.

Work out with your real estate agent or attorney the best phrasing and options to include in a coronavirus contingency.

[Read: How to Set Up a Home Gym]

Early Exit


When backing out of a real estate deal, the worst thing you can do is wait. The second it feels wrong, you should let your agent know.

As quarantines and stay-at-home orders have ramped up in the last couple weeks and concern for future income, savings and investments grows among many Americans, Winter says she’s seen deals that have just gone under contract fall out of escrow before any aspect of the due diligence process takes place.

Debbas says homebuyers he represents that are choosing to back out of the deal entirely are in some cases “forfeiting 50% of the deposit (or) 75%, just to have an amicable solution.”

The buyer tends to have more options to terminate the deal throughout the contract period than the seller, as the contract typically includes easy exit points for the buyer if adequate financing is no longer available or costs become greater than the buyer is willing to take on.

But for the seller, backing out of a deal too late in the game can be considered breach of contract, and the buyer can decide to sue the seller if he decides not to move forward. Sellers on the fence about moving in the midst of the pandemic should try to make a final decision before going under contract with a buyer.


The Best Apps for House Hunting

Browse for homes – and maybe even close a deal.

Woman on smartphone

(Getty Images)

Luckily for homebuyers, house hunting apps are growing in number and sophistication. As the online real estate marketing industry becomes more competitive, mobile apps are getting better at helping consumers find accurate housing information while offering features to help users narrow down their search. Read on for some of the most popular and helpful apps to use when searching for your next house. All apps are available on both iOS and Android.

Updated on Nov. 6, 2019: This slideshow was published at an earlier date and has been updated with new information.

Zillow

Zillow

(Courtesy of Zillow)

This is the most downloaded real estate app for both Apple and Android phones, and it includes Zillow's signature map and home value estimate tools. With more than 100 million homes in its database, Zillow's app is the most popular method for users to explore the platform. In fact, Zillow reports that more than two-thirds of its usage takes place on a mobile device, jumping to more than three-quarters on the weekends.

Best feature: The app’s dashboard includes a Your Home tab that allows you to store your property’s information and see how its value estimate changes over time.

Pro: You have the option to filter your saved searches by property listings that have recently changed, so you don’t have to scroll far to see if a house's asking price dropped.

Con: As much as you may want it to be, the Zillow Zestimate isn’t a guarantee of what your home will sell for.

Realtor.com Real Estate Search

Realtor.com Real Estate Search

(Courtesy of Realtor.com)

Filters on this app's search function allow you to include specific details on your must-have list, such as multiple floors, a fireplace, central air and even community swimming pools or security features.

Best feature: With the Sign Snap feature, you can take a photo of a real estate sign you see in a neighborhood and get details about the property right away.

Pro: You have the option to connect with a real estate agent who can represent you as the buyer in a deal, but you can also see the contact information of the listing agent if you want to talk to him or her directly.

Con: The more specific filters rely on listing agents using the right keywords, so if you’re struggling to find everything you want in a house, you may have to widen your search and keep an eye out for details in listing photos.

Trulia

Trulia

Fascia and Ridge of Gable Roof

(Getty Images)

Trulia’s app gives users a desktop-like experience in a mobile platform, with a focus on design that makes it easy to use.

Best feature: Trulia polls its online users who live in specific neighborhoods and includes the results on the app. For example, you might find that 93% of one neighborhood's respondents feel comfortable walking alone at night or that 76% say kids play outside regularly.

Pros: On each property profile, Trulia lists local legal protections, noting whether there is legislation in the area to protect against discrimination for gender identity or sexual orientation in employment, housing or public accommodations.

Cons: On any property profile, you’re prompted to call or email an agent about the property. While this is convenient if you’re serious about buying but don’t have an agent, it can get in the way if you’re just browsing.

Redfin Real Estate

Redfin Real Estate

Stock image of someone holding a smart phone.

(Getty Images)

Since Redfin utilizes an out-of-the-box business model with agents and professionals specializing in different steps of the homebuying and selling process, the company’s app serves as a way for users and Redfin agents to communicate. A map indicates which properties are listed by Redfin or another broker and also notes homes that are likely to sell fast through its Hot Homes feature.

Best feature: You can schedule a tour with a Redfin agent directly through the app. The app even lists the next available tour time.

Pro: You can click the heart symbol to keep a property you like on your radar, and you can also nix properties so they don’t keep popping up in searches.

Con: If you don’t live in one of the 80 markets where Redfin has agents, the app offers local listing information pulled from the MLS, but you won't be able to utilize the features that connect you with Redfin agents.

Homesnap Real Estate & Rentals

Homesnap Real Estate & Rentals

(Courtesy of Homesnap)

Homesnap gives house hunters the reins with this app. A signature feature allows users to take a photo of a home, and the app will identify the property and provide details about it from the local multiple listing service or public records.

Best feature: The beginning of each property profile details the property history, including previous sale prices and when it last went on market.

Pro: Each home has a section that allows you to determine your commute route and time and see both map and street views of the property.

Con: The property details are in list form, which you can expand to see everything from the home's architectural style to number of bathrooms and homeowners association fees. The depth of information is helpful, but long lists can make it easy to lose focus and miss key criteria.

Homes.com

Homes.com

Woman on her phone

(Getty Images)

On this app, you can search based on your needs and desires, including buying versus renting, home value information for properties on the market and what neighborhoods are ideal based on your preferred commute time.

Best feature: An exclamation point in the corner of a property profile lets you know that it’s a new listing, which can help you move quickly to avoid competition with other buyers.

Pro: If you'd like to get in touch with a local agent, the bottom of a property's profile often lists more than one option, making it easier for you to shop around for the right agent.

Con: While Homes.com has much of the same property information as other house hunting platforms, the app doesn't offer much in the way of neighborhood information.

Estately Real Estate

Estately Real Estate

Mature businesswoman at cafe

(Getty Images)

Estately aims to connect consumers with the right local real estate agent, and its app offers multiple ways to get in touch with agents.

Best feature: Users can click on icons on property profiles for quick information on taxes, utilities, appliances, schools and more. Profiles also include scores on things like area noise pollution and internet speed – details that aren’t always considered but could be deal-breakers.

Pro: The app encourages you to see houses in person, with multiple opportunities on a property profile to schedule a day and time to visit.

Con: Estately only covers markets in 40 states, so those looking for homes in Arkansas, Iowa, Kentucky and several others are out of luck.

Century 21 Local

Century 21 Local

(Courtesy of Century 21)

A longstanding national brokerage, Century 21 provides consumers with access to home listing information pulled from the local multiple listing services. The app can particularly come in handy if you plan to use a Century 21 agent, as that’s who you'll be in touch with if you would like to inquire more about a property.

Best feature: The app provides a notes section for every property, so you can keep track of your impressions as you compare homes.

Pro: If you start searching for homes in a different city, information about the local Century 21 brokerage you should contact changes accordingly, although you can still see listings from brokerages outside Century 21.

Con: This app pulls from Zillow to provide home value estimates, but occasionally lists "unavailable" even if the property has a Zestimate available on Zillow.

The best apps for house hunting include:

The best apps for house hunting include:

A row of detached homes in an idyllic community in Fredericksburg, Virginia

(Getty Images)

  • Zillow.
  • Realtor.com Real Estate Search.
  • Trulia.
  • Redfin Real Estate.
  • Homesnap Real Estate & Rentals.
  • Homes.com.
  • Estately Real Estate.
  • Century 21 Local.

Read More

Updated on April 7, 2020: This story was previously published at an earlier date and has been updated with new information.

Tags: real estate, housing market, existing home sales, pending home sales, home prices, mortgages, coronavirus


Devon Thorsby is the Real Estate editor at U.S. News & World Report, where she writes consumer-focused articles about the homebuying and selling process, home improvement, tenant rights and the state of the housing market.

She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.

Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at dthorsby@usnews.com.

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