By no means is this legal advice as I am not an attorney, nor am I licensed as a real estate agent in the state of IL. You definitely need to speak with your attorney. It depends upon the terms of your contract, and the sellers.
However, if you are lucky enough to do this - take heed from the experience. Never extend an offer you do not want to take to its ultimate conclusion. It is not fair to the parties involved if you get cold feet (without genuine cause).
Specific performance can be a huge issue in today's market. You made an offer that was accepted and the seller took his/her property off the market. During this time - they may have lost a buyer who would've taken it all the way.
I do hope you get your earnest money back - and that you will exercise caution in the future.
My suggestion to you is to read the contract, if you don't understand it, consult your agent or attorney. They are the ones who can provide the answers.
I agree with Deborah, you need to consult with your attorney. Although in general, you might just lose your earnest money but it could be worse as it really depends on your detailed contract terms, your local real estate law, which stage of the contract you are actually in, whether you have done anything or not on your side is, in some way, Irrelevant, or even how the seller might react, These all need to be considered before you know what you might or might not lose.
I am not sure if you are actually thinking of backing out now (buyers remorse), or if you just want to learn about your options. Either way, you really should hurry up and have your attorney (hopefully a real estate attorney) take a good look of your contract; explain to you everything you have signed and your buyer performance obligation and consequences. This is something should have been done PRIOR to signing the contract instead of afterwards.
Buying a home is a huge thing and is not something to be taken easily. That's why it is so important for a consumer to get professional advise from their Realtor before buying or selling their home.
That's what the 5 day home inspection and attorney review period is for. I am not an attorney and cannot give you legal advice. I would consult immediately with your attorney.
Seriously, go back to the time before you offered and trace through the negotiations, wirte down what your motivations were. Why did you want to get into the deal? Did you have hesitations? Do your original motives still have validity?
Now subjectively think about why you are having "buyers remorse". Buyers Remorse is so common that most buyers experience it to some degree or another. It is natural human emotion. This is because it is such a large and unusual purchase. It is normal to doubt yourself and worry, even if you are normally a very self assured individual.
I recommend that you resolve to yourself to make logical decisions at this point. Acknowledge your emotions, but control them. If it is logical to get out of the contract because it is either a really bad deal, or if your personal circumstances have changed dramatically from when you decided to buy, then you should try to get out of it. If it is that bad a deal and your contingencies don't protect you then you may have to forfeit. . Ah but others have covered that.
If the reason you got into the deal are still valid, after thoughtful reflection, then the cold feet might just be irrational old Mr. Emotion taking control.
If you used a standard IL Realtor approved contract, than you probably have the atty review contingency, the inspection contingency and the mortgage contingency. My understanding is that the atty review can change just about anything under the sun except the price. You don't need to explain why and you should be able to simply have your atty write a letter stating, "It is not in my clients best interest to pursue this contract. Please void and nullify the contract and refund the earnest money." That is the good news.
The bad news is, the inspection clause is only if there are serious, major mechanical flaws with the home. The home inspection will say, "You should do this and you should do that" and it might say it will cost you x amount to fix all of these problems. But unless the electrical, plumbing, HVAC, foundation or something major and serious such as mold is an issue, you can't just back out because all the little stuff adds up to $100,000. And even if it does have something serious, the seller has the option to fix it and make you buy the house.
So then the next contingency, mortgage. You pre-qualified but really want to get out of this contract. You go out and buy a brand new car and destroy your debt ratio so the bank won't loan you money anymore. Your contract says 10% down and the remainder to be financed for no more than 8% interest. The seller can say, well if the bank won't finance you I will at 8%. And boom! No more contingencies. If you don't buy the house then, the seller can sue you for the entire purchase price and make you buy the house. It is NOT just your earnest money that is at risk!!!
Again, that is just my understanding and your attorney would have to see the contract that you signed to determine your situation.
I liked Deborah's question of whether you still want the home. Your response sounded like buyer's remorse, NOT REGRET. I think that is why Deborah said, "What if it appraises higher?"
The difference between buyers remorse and regret would be if you bought a new car or computer on clearance because the new models were coming out soon. You got a great deal (you think) because it was marked down by 30%. The new model comes out and it has some improvements and the new model price is the same as what you paid. That would be regret. But if the new model came out with some improvements that you would like but at a price higher than the old model's original price, that would be remorse. You don't really know if you would have paid the higher price or not because you have already spent the money. But you knew the new model was coming out and you chose to buy because of the opportunity to get a great buy.
If someone came along and put a higher back-up offer on the house you are buying, would you let the house go to them? The seller surely would let you out of the contract. The banking industry is EXTREMELY conservative these days. If prices ARE TRULY going down that fast, they will appraise it low to protect themselves. You should have your agent pull up "under contract" listings to see how things look.
So, if the appraisal does come out lower, you should buy it at the appraised price if you still want the home. Let us know what it appraises for.