The Ways Home Sellers Can Back Out of a Contract

Sellers may have a variety of reasons for trying to back out of an accepted offer. Among them:

• If the seller gets a higher offer from another buyer.
• If the seller has been unable to find a suitable replacement home.
• If the seller loses a job or a family member dies, making it financially difficult to move.
• If the seller has emotional ties to the house and can’t let go.
• If there is a disagreement within the seller’s family about leaving the house.
• If the property appraises for more than what the buyer has offered.

Selling a house can be expensive, complex and time-consuming, so it’s a huge relief to everyone involved when a deal is struck and a contract is signed. But what if the seller signs the purchase and sale agreement, then wants to cancel the deal? Is it legal? And what are the buyer’s options in that case?

Let’s look more closely at when and how home sellers can back out of a contract.

Is a seller legally allowed to back out of a contract with a buyer?

It depends on the situation, Generally, if the buyer is not performing, then the seller can cancel the contract, provided the seller has complied with the provisions in the contract regarding notice to the buyer to perform. Instances of failure to perform could include missing a deposit or a closing deadline, for example.

Home sellers backing out is very, very common, especially in a hot real estate market. Even when the seller doesn’t have a clear legal right to renege on a deal, it can still happen.

I do these cases all the time, but it’s generally a very tough case for the seller. Typically, you would rather be on the buyer side. It’s easier for a buyer to cancel and hard for a seller to get away without a penalty.

Buyers have the upper hand, because most contracts for a home purchase contain provisions that protect them and keep the purchase process moving along. Sellers who want to renege have an uphill battle, unless a buyer fails in their obligations in some way.

When can a home seller back out of a contract?

Legally, a seller’s best bet for successfully backing out of a sale is if a contingency written into the contract has not been met.

Home sellers can give themselves an “out” by adding contingencies to the sales contract that make the sale contingent upon certain conditions. For example, a seller can make the sale contingent upon having a contract to buy another house, so they have a place to move to. Or the seller can get contractual latitude by adding a time frame or deadline for all purchase offers.

Or say a contingency is explicitly included in the contract that the seller be able to secure a new home, and then they are unable to do so. In such circumstances, the seller may have legitimate grounds to walk away from the sale.

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Craig Cherney is a trusted client advisor and a sought after real estate expert witness who is hired by the nation’s top Real Estate Litigation Attorneys to help resolve their litigated real property matters.  Craig has appeared as a testifying expert witness before judges and juries in California, Arizona, Nevada and other jurisdictions across the country. 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