What to Do When a Seller Backs out of a Home Sale
When a seller backs out of a home sale, the first thing you’ll want to do is review the details of your purchase agreement. Learn more here.
Written by Melanie Krieps Mergen
Reviewed by Melanie Reiff
When a seller backs out of a home sale, the first thing you’ll want to do is review the details of your purchase agreement. If the seller is backing out of the home sale for reasons that aren’t protected by your contract or local real estate laws, they could face costly consequences.
After what felt like a neverending hunt for your next home, you made an offer on a property you loved and were thrilled to find out it was accepted—only to find out a short while later that the seller backed out of the contract. Can they do that? Well, it depends.
Depending on the circumstances, you might still be able to salvage the home sale, or you might be forced to start over on your search. To help you get a better sense of your options,
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Can a seller back out of a home sale?
Can a seller actually back out of a home sale? Technically, yes, but it’s difficult to do so without facing consequences, and it largely depends on the details of your purchase agreement.
If there were certain contingencies involved in the purchase agreement—for example, the home sale depended on their ability to find a suitable home within a certain period—the seller may be able to cite that reason for backing out of the home sale without facing any penalties. This could force you to start over on your house hunt.
Local and state real estate sale laws that apply to your city will also play a role in whether a seller can back out of a home sale, and under what circumstances.
When can a seller legally back out of a contract?
So, what are some circumstances that would allow a seller to legally walk away from your home sale? The following are several common examples of circumstances that would give the seller of a home a legal out:
The home sale wasn’t in writing
If your home sale was only based on a verbal agreement, your seller likely isn’t bound by any sort of contract, making it that much easier to walk away from a sale if they’ve changed their mind.
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The seller’s reason is based on a contingency
If the seller cites a contingency that was listed in your purchase agreement as their reason for walking away, it has to be included in the contract to be valid.
Different contingencies could be included in a real estate contract, many of which are usually in place to protect the homebuyer—like a financing contingency—which would let you back out of a home sale if your financing fell through. Another common one is a home inspection contingency, which lets you walk away from your contract if problems with the house are discovered by a home inspector.
One common example of a contingency that protects the seller would be a suitable housing contingency, which allows the seller to legally back out of the home sale if they haven’t found a suitable next home of their own within a certain period.
The buyer didn’t meet requirements on their end of the contract
Whether intentional or not, sometimes it’s the buyer’s actions that allow the seller to legally back out of a home sale. If a buyer has failed to meet the requirements of the home purchase agreement—like finalizing their financing by a certain date—the seller won’t be obligated to stick around.
They back out within a five-day attorney review period
In certain states, there is a required five-day attorney review period in the selling process. It’s also possible to put an attorney review period into your home sale contract.
During this period, an attorney on either the buyer’s or seller’s end of the contract can opt to approve, reject, or propose changes to a real estate contract based on its legal soundness and whether it serves their client’s best interests. This allows the buyer or the seller to walk away from the contract without consequences during this period.
Why would a seller back out of a contract?
There are plenty of reasons behind the scenes that could influence a seller to back out of a home sale:
- Their circumstances may have changed
- An unexpected life event could have affected their ability to move
- They received a higher purchase offer from another buyer
- They got cold feet after difficult or extensive demands from a buyer
- They were unable to find a new home
- They experienced seller’s regret and realized they were emotionally attached to their current house
- There were disagreements about the sale among estate holders
Your purchase contract may have provided legal protections for some of these reasons, but if not, the seller could face penalties for backing out of the sale.
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What to do if a seller backs out of a contract
Finding out your home sale has fallen through can be incredibly disappointing, especially if you were convinced it was a done deal.
Depending on the seller’s reasons for walking away from the home sale, you might be forced to just cut your losses and start over, but you might be able to pursue legal action in some cases.
If the seller is backing out of your home sale, here are some options for how you can respond:
- Check the details of your purchase agreement, as well as real estate purchase laws that apply to where you live
- Consult a real estate attorney to evaluate your legal options
- Depending on the circumstances, there may be grounds for a lawsuit
- You might be able to place a lien on the home
- You may be able to ask the seller to pay you for damages
- Mediate with the seller: Depending on the seller’s reasons for walking away, you might be able to come to a common agreement or decide to allow them to back out anyway without consequences
- Your earnest deposit money should also be refunded to you in most cases, particularly if the home sale ended for reasons beyond your control
Real estate law can be extremely complicated, and since there can be so much room for variation from place to place, it’s usually best to meet with a legal expert to understand your options if a seller has unexpectedly backed out of your contract.
If your home purchase does end up falling through, even if it’s not the outcome you were hoping for, it isn’t always a bad thing. There might have been a serious problem with the home that you weren’t aware of, and there’s always the possibility that there’s another home headed to market that can better meet your needs.
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FAQ
Can a seller back out of a home sale?
Whether a seller can legally back out of a home sale contract depends on applicable real estate laws where you live and the details of your purchase agreement.
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