published on February 23, 2022 - 1:38 PM
Written by Gabriel Dillard

From a buyer’s point of view, one may think that home sellers rejoice when they can sell their homes. In reality, that is not always true. Sellers may change their mind and start wondering, “can a seller back out of a contract?” In this article, I will outline the reasons for this change of heart and how it can be done.

 

Can seller back out?

Yes, it is possible. That is, if the seller can offer compensation to the buyer or if the buyer regrets his purchase. Timing is also of essence — things will be much easier before the purchase agreement is signed. If you back out after signing, you may encounter a specific performance provision.

What is specific performance provision? It gives buyers the power to bring a seller to court if the purchase agreement is canceled after signing. Buyers may not choose this path due to the cost of legal fees. However, they may still proceed if they have suffered a significant loss through moving, inspections, appraisals and other costs. Thus, how can a seller back out of a contract? In this case, the easiest way out is to pay the home buyer to compensate for the money lost.

 

Why does a seller back out?

Some of the common reasons include:

  • Receiving a higher offer
  • Emotional attachment
  • Unforeseen changes
  • Nowhere to go.

 

How to solve this problem?

When sellers want to back out of a sale, the buyer will often apply legal penalties against them. Here are a few cases in which a seller might be able to successfully back out:

  • Attorney review. If the contract includes a five-day attorney review period, it is possible to back out during that time without legal consequences.

  • A home sale contingency. A contingency of sale is often used by experienced sellers who are simultaneously buying and selling a home. It stipulates that in case the seller fails to purchase his next home, he has the right to back out of the contract.

  • The buyer fails to fulfill the contract requirements. Can seller sue buyer for backing out? When sellers want to sell their home fast, they can include time constraints in the contract. If buyers fail to meet the deadlines, sellers have the right to back out.

  • Talk to the buyer. Sometimes the best thing to do to cancel the contract is to be honest with the buyer. Some buyers may be flexible enough to let you off. For example, when a family member falls sick or passes away and you need to rethink your moving plans. When humanity is involved, you may be able to cancel the contract without taking the matter to court. Do prepare to offer some incentive to pay the buyer back for their kind consideration, and be prepared to negotiate.

 

Seller backs out. Now what?

Some possible scenarios include:

  1. Sellers being forced to close the transaction. In case the buyer could not be convinced to cancel the contract, sellers may be forced to complete the transaction. Can the seller sue the buyer for backing out? Yes, but the seller is in a weak position to counter. Similarly, buyers may take the matter to court if they believe the sellers do not have legal standings for canceling the contract. In this case, the buyer may ask for compensation for both the loss of the home and the legal fees.

  2. A lien being placed on the property. Unfortunately, the buyer has a legal right to the property after the purchase agreement has been signed. When the seller attempts to back out, the buyer can place a lien on the property. The seller becomes unable to sell the home to anyone else.

  3. The listing agent takes the matter to court. Apart from signing a deal with the buyer, sellers are also bound to their agent by a listing agreement. If the seller fails to abide and tries to back out, the listing agent can take the matter to court. Even though the transaction is canceled, the seller is obligated to pay the agreed commission.

  4. Nothing serious happens. Sometimes, although it is very rare, sellers can get their property back without penalty after dealing with the buyer properly. The sellers can then sell their homes fast but with a better offer, or stay there as long as they want.

After signing a purchase agreement, sellers are in a difficult position to back out. In most cases, they will face legal consequences or are obligated to pay a sum of money to the buyer. Therefore, do not rush in accepting offers. Only sign the agreement when you are absolutely ready to move on.


Linda Peltz is a full-time Realtor who has been serving the Fresno metro and surrounding communities for 10 years. She is a Colorado native with expertise in buying and selling real estate since her early 20s. She helps clients obtain real estate properties such as single-family and multi-family homes, condominiums, and residential lands. Linda also represents her clients during the home purchase and selling transactions from beginning to completion. She is a part of the eXp Realty of California Inc.


e-Newsletter Signup

Our Weekly Poll

Do you agree with a plan at Bullard High to restrict student access to their cell phones?
54 votes

Central Valley Biz Blogs

Popup Click Me!!!