DEFINITION of 'Retract'

Retract means withdrawing a bid, offer or statement before any relevant party acts on the information provided. For example, it is common practice in real estate transactions to provide a deposit, known as earnest money, showing the buyer's intention to complete the transaction. If the buyer decides to retract the offer on the property, he may also be required to forfeit the deposit.

BREAKING DOWN 'Retract'

Because new opportunities or unforeseen challenges occur, such as a job transfer or loss of income, a bidder may have to retract a bid before the seller takes action.

Retracting a Construction Bid

Bid, performance and payment bonds are required for most public construction projects. In the past, the federal government faced high failure rates among private firms performing public construction projects. Many contractors were insolvent when the jobs were awarded or became insolvent before finishing the project. When the government was left with unfinished projects, taxpayers covered the additional costs. Since government property is not subject to a mechanic’s lien, laborers, material suppliers and subcontractors often went unpaid.

In 1894, Congress passed the Heard Act, authorizing the use of corporate surety bonds for securing privately performed federal construction contracts. The Heard Act was replaced in 1935 by the Miller Act, which currently requires performance and payment bonds on federal construction projects.

Since most U.S. public construction is performed by private sector firms, the work is typically given to the lowest bidder. A bid bond is often used to prevent firms from retracting their bids, assuring the government the successful bidder performs according to the contract’s terms and conditions at the agreed-upon cost within the time allotted. If the lowest bidder fails to honor its commitments, the owner is protected up to the amount of the bid bond, typically the difference between the low bid and next-highest responsive bid.

Retracting a Real Estate Bid

During the contingency period, after a contract is signed and earnest money is secured, all contract requirements must be met for the buyer and seller to move forward with the transaction. For example, the home must be appraised for a set amount, and the buyer must secure appropriate financing. The home purchase is not complete if, for example, the inspector finds the roof needs replacing or another issue arises. The buyer may retract his bid with a full return of earnest money; the seller may proceed to find a new buyer. Retracting a bid outside the contingency period results in the seller most likely keeping the buyer’s earnest money to cover damages incurred through not completing the transaction.

RELATED TERMS
  1. Election Period

    The period of time during which an investor who owns an extendable ...
  2. Earnest Money

    A deposit made to a seller showing the buyer's good faith in ...
  3. Retractable Preferred Shares

    A specific type of preferred stock thats lets the owner sell ...
  4. Bid Bond

    A debt secured by a bidder for a construction job or similar ...
  5. Bidding War

    A situation where two or more buyers are so interested in an ...
  6. Performance Bond

    A bond issued to one party of a contract as a guarantee against ...
Related Articles
  1. Investing

    What is Earnest Money?

    An earnest money deposit shows the seller that a buyer is serious about purchasing a property.
  2. Investing

    Negotiating the Bid

    A bid is an offer investors make to buy a security.
  3. Investing

    What's a T Bond?

    Treasury bonds, or T-bonds, are marketable securities issued by the US government, and are available in increments of $100. Bonds have a maturity range of ten to 30 years, with 30 being the most ...
  4. Investing

    Contingency Clauses In Home Purchase Contracts

    Here, we introduce widely used contingency clauses in home purchase contracts and how they can benefit both Buyers and Sellers.
  5. Investing

    How Bid Price Affects Liquidity

    The bid price is the amount a buyer will pay for a security.
  6. Investing

    Home Sale Contingencies: What Buyers And Sellers Need To Know

    Home sale contingencies protect buyers who want to sell one home before purchasing another. Find out what buyers and sellers need to know about these contractual conditions.
  7. Investing

    Housing Deals That Fall Through

    Find why buyers back out and what you can do if you're left holding the bag.
  8. Investing

    What You Should Know About Home Sale Contingencies

    A home sale contingency protects buyers who want to sell one home before purchasing another.
  9. Investing

    The Ins And Outs Of Seller-Financed Real Estate Deals

    There's more than one way to buy or sell a house. Seller financing presents yet another unique option.
  10. Small Business

    Risks Associated With Government Contracts

    Government contracts can be rewarding, but they also come with a variety of risks.
RELATED FAQS
  1. How do earnest money deposits work in a short sale?

    Find out how earnest money deposits work in a short sale real estate contract, including when earnest money is forfeit and ... Read Answer >>
  2. When should a real estate broker release earnest money deposit funds?

    Find out when and under what circumstances a real estate broker is allowed to release the earnest money deposit in a real ... Read Answer >>
  3. What does the variance between the bid and ask price of a stock mean?

    Find out how stocks are traded in the market, why the bid and ask prices are different and why the bid-ask spread is smallest ... Read Answer >>
  4. What do the bid and ask prices represent on a stock quote?

    Learn what the bid and ask prices mean in a stock quote. Find out what represents supply and demand in the stock market and ... Read Answer >>
  5. When is a takeover bid legally canceled?

    When a firm makes an official bid to take over a target company, a legal offer is created. The firm making the offer becomes ... Read Answer >>
  6. What do the numbers that follow the bid and ask numbers in stock quotes represent? ...

    When looking at stock quotes, there are numbers following the bid and ask prices for a particular stock. These numbers usually ... Read Answer >>
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center