What Is a Rescission Period?

A rescission period is a limited window of time after signing a contract during which you can cancel without penalty. Most new construction contracts do not include one unless required by state law.

The Short Answer

A rescission period (also called a cooling-off period or right of rescission) gives you a set number of days after signing to change your mind and cancel the contract without losing your deposit.

While some types of contracts have legally required rescission periods, most new construction purchase agreements do not. Whether you have one depends on your state and the specific type of transaction.

When a Rescission Period Applies

Federal law (the Truth in Lending Act) provides a three-day right of rescission for certain mortgage refinance transactions, but this generally does not apply to purchase agreements.

Some states require rescission periods for specific types of real estate transactions, such as timeshares or property sold through door-to-door marketing.

A few states have broader cooling-off period requirements that may apply to some new construction sales, especially those conducted in model home sales centers.

What If Your Contract Has One?

If your contract includes a rescission period, use it wisely. Have the contract reviewed by an attorney within that window.

To cancel during a rescission period, you typically need to provide written notice to the builder before the period expires. Follow the exact procedure specified in the contract.

Your earnest money should be fully refundable if you cancel within the rescission period.

What If It Does Not?

If your contract has no rescission period, you may still have cancellation options through unfulfilled contingencies (financing, inspection, etc.).

Once you sign a purchase agreement without a rescission period, you are generally bound by its terms. This is why having the contract reviewed before signing is so important.

You can ask the builder to add a rescission period, but production builders rarely agree.

Related Content

Have a new construction contract? Scan it for $49 at fineprint.homes