Can You Back Out of a Real Estate Contract in New Mexico? Here’s What to Know

Buying or selling a home is one of the biggest financial decisions most people will make—so it’s no surprise that sometimes, things change. Whether you’re having second thoughts or running into unexpected challenges, it’s important to understand your options when it comes to backing out of a real estate contract in New Mexico.

Let’s break down what’s allowed, what’s not, and what it could cost you.

What Is a Real Estate Contract?

A real estate contract is a legally binding agreement between a buyer and seller that outlines the terms of a property sale. Once signed by both parties, it locks in important details like:

• The purchase price

• The closing date

• Contingencies (conditions that must be met before closing)

Because it’s a legal document, backing out without valid reasons could result in financial or legal consequences.

When Can a Buyer Legally Back Out?

Buyers in New Mexico typically have several opportunities to cancel the contract without penalty, if done within the outlined terms.

1. Contingencies Are Not Met

Most purchase agreements include contingency clauses, such as:

• Home Inspection Contingency: If the inspection reveals major issues and you can’t reach an agreement with the seller, you may cancel.

• Appraisal Contingency: If the home doesn’t appraise for the purchase price, you can walk away or renegotiate.

• Financing Contingency: If you’re unable to secure a mortgage by a certain date, you can exit the deal.

• Title Contingency: If the seller cannot deliver clear title, you’re generally free to back out.

Contingencies are your legal safety nets—but they must be clearly written into the contract.

2. During the Due Diligence Period

In New Mexico, buyers often have a “due diligence” or “inspection” period (usually 7–10 days) where they can terminate the contract for almost any reason.

This is the best time to cancel without penalty, provided you notify the seller within the allotted time.

What Happens If a Buyer Cancels Without Cause?

If the buyer tries to back out after contingencies have been met and deadlines have passed:

• The earnest money deposit could be forfeited to the seller.

• The seller may pursue legal action for breach of contract, though this is less common.

• The buyer may also lose money spent on inspections, appraisals, and other pre-closing expenses.

That’s why it’s essential to understand your contract and timelines—working with a knowledgeable real estate agent can help you stay protected.

What About the Seller?

Yes, sellers can back out—but it’s much harder.

Sellers are more limited once a contract is signed. If they want to cancel the deal (say, because they got a better offer or changed their mind), they typically need a valid reason, like:

• A buyer failing to meet a contract requirement

• Title issues that cannot be resolved

• Contingencies on the seller’s side that aren’t met

Otherwise, the buyer could take legal action, including suing for “specific performance”—which could force the sale to go through.

Tips to Avoid Legal or Financial Trouble

• Read every clause carefully before signing

• Know your contingency deadlines and mark them on a calendar

• Communicate openly with your agent and lender

• Get everything in writing—verbal agreements don’t count

• Consult a real estate attorney if you’re unsure

Navigating a Contract with Confidence

Real estate contracts are complex, but the right guidance can make all the difference. Anita Mora works closely with clients to help them understand their options, timelines, and obligations—so there are no surprises down the road. Whether you’re buying or selling in Albuquerque, you can trust Anita to guide you every step of the way.

Real Estate FAQs

1. How much is the earnest money deposit in Albuquerque?
Typically 1–2% of the purchase price. This money is held in escrow and can be refunded depending on the terms of the contract.

2. Can I cancel a real estate contract after the due diligence period?
Yes, but only under certain conditions—like if a contingency was not met. Otherwise, you risk losing your earnest money or facing legal consequences.

3. Can a seller cancel if they receive a better offer?
Not usually. Once a contract is signed, they are legally obligated to honor it unless the buyer fails to meet the terms.