1) it depends upon the language of your contract
2)You should immediately have a candid conversation with your Realtor about your concerns.
As regards 1): Standard Oregon Real Estate Forms, which most Realtors use for residential purchases, give the buyer several periods to discover defects in the title, the condition of the home and to have an inspection and owner property disclosures. There are different ways to get out of the purchase with your earnest money intact depending upon the result of those disclosures. You are supposed to give a reason for backing out - but the list of possible reasons is extensive and usually not hard to find. That said, as an industry we rely on each party acting in good faith. Cold feet are a fact of life, but not technically a legitmate out.
Which brings us to 2): the bigger question. What are your specific concerns? What has changed for you from the time you started the offer to now? I hear a couple of things in your comments. First, that the media has made statements that Portland has felt the bubble burst. I say, 'whatever' to that. All across the US the pace of sales has slowed. Portland, Seattle and the Bay Area have all continued to have moderate appreciation (based on Median home price) during this market. We continue to rank in the top 10 for both condo and residential markets in the nation when last I checked. Likewise, even the hardest hit areas in the US (like Las Vegas) have seen that people who've owned their homes for more than 5 years have seen equity appreciation - it is those who have been in for 2 years or less or maxed out their equity lines of credit recently that are not getting out what they put in. Do you plan to live in your new home for at least 3-5 years?
Remember, also, that if your alternative is renting, you will be foregoing any opportunity for tax benefits of the mortgage interest deduction (which for that price point could be several hundered a month depending on your income bracket), and appreciation as the market improves. A recent article in 'Time' magazine (Feb. 25, '08) pointed out that if you purchased a home now and the market declined over the next 12 months, but the interest rate increased even a small amount - your payment would be virtually the same. (See their diagram or speak with your mortgage broker/lender about how a change in the rate could negate any gains you might have in waiting to buy.)
As relates to Lake Oswego, what attracted you to purchasing a home there in the first place? Was it the award winning schools? The charming downtown with the summer hanging flower baskets on every post? The exceptional library and great restaurants? Do you plan to enjoy the live music four times a week in the summer or the public art in the down town area? Or to use the walking and bike paths all around town? What are your expections for public safety and commute - does Lake Oswego meet those?
Lake Oswego is some of the most expensive real estate in the Metro area because of it's high quality of life and proximity to downtown. If price is the bottom line, then some other nice communities might have warranted a look. However, a good agent should be able to provide you with a Custom Market Analysis on the home you are purchsing so that you can see it in comparison with other sold properties. I think you will find that that price point for a 2 bedroom home in Lake Oswego may not be unwarranted.
To conclude, if you have an agent - put them to work for you. If they won't work for you, spell out your expections of what information you need and if they won't preform speak to their principal broker about your concerns and request that they rectify the problem.
If you do not have an agent, it is never too late to bring one into the transaction to represent your needs. I would be happy to help you if you feel that would be prudent at this point. A house is such a happy opportunity- a launch pad for all your new adventures. I really hope that you find a place that serves not only as a great investment, but also a safe harbor to retreat to at the end of a busy day and a place to strengthen relationships. Lake Oswego is a great place to live (I've been here for years) and if you end up here, I hope it exceeds all your expectations.
Kate Myers, Realtor
Lesson learned here is to always evaluate where the 'source' of information is coming from and what the back-story is behind the info.
We are experiencing a 1-3% downturn and homes are still selling fine provided that they are priced right.
The Bubble Burst is a self fullfilling prophecy syndrome created by Yale University Economist Shiller and he has all the bankers and Media people believing it.
The guy is an idiot.
Don't drink the koolaid. Every market is different and it is a matter of available housing and local jobs.
Portland and Seattle are in the hottest job growth area in the country and therefore we are doing better.
We are in a slow down but there is no real bubble here to burst.
Hope that helps;
Re\Max Hall of Fame
In any market noone knows when the top or bottom of a market happened except by looking backward.