When is it too late for a home seller to back out?

Many Americans experience buyer’s remorse after shelling out a small fortune for a new home. But what about sellers? You might think selling a home — especially if you made a profit — is a cause for celebration and, for many home sellers, it is. However, that’s not always the case. Seller’s remorse happens for a number of reasons but it isn’t something you can act on.

Once you’ve accepted an offer on your home, it can be very difficult to back out of a real estate contract. Whether you’ve experienced a sudden change of heart or a change of circumstances, you might want to reconsider selling your home. Are you stuck? Here, we’ll explore the reasons some sellers want to back out of a real estate contract and discuss the possibility of doing so.

Can a home seller back out after a sale?

Yes, a home seller can back out of a real estate contract, but only in instances in which they’re willing to compensate the buyer for their trouble, or they sold to a buyer who is also experiencing buyer’s remorse.

It also depends on when exactly you’re trying to back out. If you want to back out selling your home, it’s much easier before signing a purchase agreement. There are often escape clauses in purchase contracts, but usually they are there to protect the buyer, not the seller. Once you have an executed purchase agreement, backing out may have serious consequences due to something called a specific performance provision.

Specific performance provisions allow buyers to bring a seller to court if they don’t follow through with the purchase agreement. That’s not always the best option for a buyer considering the cost of legal fees, but if they’ve suffered a significant loss through moving, inspections, appraisals, and other costs, they may still follow through. 

Otherwise, the easiest thing for a seller to do is pay the home buyer to recoup the money lost.

Why would a home seller back out of a sale?

Home sellers may want to back out of a real estate contract for a myriad of reasons. Some of the most common include:

A higher offer comes in

It’s not a legitimate reason to back out of a purchase contract, but it’s only natural to want to get the best price for your home. Some sellers who accept an offer too soon discover that the home appraises for higher than they listed it for, prompting them to attempt to back out of an agreement. If the agreement has already been signed, it’s next to impossible for a seller to back out. But if an appraisal changes what a seller is willing to sell the house for, they can cancel the agreement before signing.

Emotional attachment

We humans are sentimental creatures who tend to create significant emotional attachments to our homes. Just because you might stand to make a profit by selling your home or you think you’re ready for a new chapter doesn’t mean you don’t still love your home. As the closing date looms, many sellers get cold feet. Unless a buyer feels the same way, however, don’t count on sentimental reasons getting you out of a signed purchase agreement.

Change in circumstances

Life moves fast and there are many things that could happen in a home seller’s life to make them want to back out of a home sale. From a relocation falling through to losing a job or a child deciding not to leave for college, when life changes, so do moving plans. 

Nowhere to go

It’s a bit of a balancing act to sell a house and then move right into a new one. If a seller fails to find a new home within the closing period, they may prefer to stay in their current home.

How can a home seller back out of a sale?

There are plenty of reasons why a home seller might want to back out of a sale, but it is very challenging to do without facing legal penalties or blowback from the buyer. The few instances in which a seller might be able to successfully back out of a real estate contract include:

Attorney review

One of the simplest ways to back out of a signed agreement is by making a quick decision. If the purchase contract stipulates a five-day attorney review period, you may back out of the sale during that time without legal consequences. The attorney review period is mandatory in some states, but not in all, so make sure to verify if it’s included in your purchase agreement.

The seller wrote in a home sale contingency

Forward-thinking sellers who are trying to buy and sell a home at the same time often include a contingency of sale in the purchase agreement. This contingency says that in the event that the next home a seller was purchasing falls through, they reserve the right to back out of the contract. It only applies if it’s written into the contract, however, so make sure your agent and attorney know if you’d like to include a contingency.

The buyer fails to uphold their end of the contract

Sometimes, the best recourse a seller has to back out of a real estate contract is through no action of their own, but due to the buyer’s actions. 

Many buyers take their time fulfilling contract requirements, so some sellers like to include a time-is-of-the-essence provision, stipulating that both parties must fulfill the contract in a timely manner. If the buyer fails to do so, the seller has grounds to cancel the contract. For instance, if the buyer doesn’t meet deadlines outlined in the contract like performing a home inspection within the agreed-upon timeline, the seller may cancel the contract.

Appealing to the buyer

If you want to avoid the cost and frustration of a legal battle, don’t back out of the contract at all. Instead, share with the buyer why you need to terminate the contract. You might find the buyer more flexible than you’d expect. 

If unexpected circumstances like an illness or a death in the family cause you to reevaluate your moving plans, try to explain to your buyer through your agent or attorney. While a change of circumstances is not legal grounds for backing out of a contract, appealing to a buyer’s humanity is often your best bet to cancel the contract without an expensive court battle.

Explaining the situation to a buyer is a good start, but you should also prepare to offer some incentive. Buyers incur costs during the closing process so even if they’re getting their down payment back, you can’t expect them to walk away for nothing. Offer to reimburse the closing costs and maybe a little bit more. There’s no “magic number” to offer, just what you think is fair — and be prepared to negotiate.

What happens if a home seller backs out of a sale?

Even if you manage to get out of a real estate contract, you should still expect consequences. Attempting to do back out of a sale can result in a number of scenarios:

1. The buyer forces the seller to complete the sale

It’s not easy to back out of a home sale after signing the paperwork. If the seller doesn’t have a legal case and can’t convince the buyer to agree to dissolve the contract, they may be forced into “specific performance.” That’s just a legal term for forcing the seller to complete the transaction. If the seller chooses to fight, they don’t have good odds.

In a similar scenario, a buyer may sue the seller if they believe the seller does not have legal grounds for terminating the contract. In that event, the buyer may demand not only monetary compensation for the loss of the home but also that the seller pays their legal fees.

2. The buyer places a lien on the property

Since the buyer has a legal right to the property after the purchase agreement is signed, if a seller tries to back out, the buyer can file a lis pendens, or a lien, on the home. Even if the seller removes to vacate the premises, they’re legally unable to sell the home to anyone else.

3. The listing agent sues the seller

Backing out of a contract doesn’t just impact the buyer and seller. A seller doesn’t just sign the real estate contract, they also sign a listing agreement with their agent. Failure to complete that contract gives the agent grounds to sue the seller should they try to back out of a sale. Even if the sale doesn’t take place, the seller still might have to pay the agent the promised commission on the property.

4. Everything works out fine

In the rare occasion that a seller resolves a conflict with the buyer and backs out of a real estate contract without penalty, they’re back to square one. They still own the property and can decide what to do with it. Whether that’s finding a better offer or staying there for years to come, it’s up to the seller to decide. Working with Orchard to sell your home might be a good next step, to ensure you get top-dollar.

Once they’ve signed a purchase agreement, it’s very difficult for sellers to back out of real estate contracts. Sellers almost always incur legal or monetary penalties when they back out of a sale unless they’ve managed to strike a deal with a benevolent buyer. This is all the more reason to take your time when fielding offers, and only put pen to paper when you’re positive you’re ready to move on.