It is rare for a seller to back out of a sale, but it does happen. Especially in a highly competitive market where sellers are receiving multiple offers and several above asking. Is a seller able to back out of an offer contract, when they have accepted it and signed it?
Why Would a Seller Change Their Mind on Selling Their Home?
There are many different reasons why a seller may choose not to sell their home after accepting an offer. The most common reason why sellers back out of a home sale is that they are unable to find a new home that they love. In some very rare cases, a seller may try to back out of a home sale because they receive a new offer that is more beneficial to them. Is this allowed?
When Can a Home Owner Back out of the Home Sale?
Here are five examples of when a home seller is perfectly within their right to back out of a home sale:
The Contract Has Not Yet Been Signed. Any home purchase contract must be signed by both parties in the transaction in order to make it official and binding. If a seller (or even if the buyer) has yet to sign the actual paperwork but has given verbal acceptance, they can still back out of the arrangement at any time.
A Contract is in a Five-Day Attorney Review Period
Many home sales involve the use of a real estate attorney that provides a five-day attorney review provision. During this waiting period an attorney representing either party can cancel the contract at any time for any reason. This gives both parties the ability to end the sale without negative consequences to them.
There is an Escape Hatch in the Contract
Sellers can put an addendum in place in a contract as a counteroffer. For example: a seller can add in a contingency that the home sale will not go through if they cannot secure a new home to purchase.
The Buyer is in Breach of Contract
If the buyer does not hold up to their end of the contract, a seller has the right to decide not to sell the home. This most often happens when a buyer is unable to secure funding through the first lender they apply for a mortgage from.
Buyer Makes Requests the Seller is Unwilling to Accommodate
This is something that most often happens when there is an issue found in the home inspection process. Sometimes a buyer will return to the negotiation table with the inspection report and ask what the seller feels is too much in asking for repairs or money for repairs. At this point, the seller has the power to say no and walk away from the sale.
When is a Home Owner NOT Able to Back Out of a Sale?
Once a purchase agreement contract has been signed by both parties and is past the five-day attorney review, it is pretty difficult for a seller to walk away from a sale. A seller can face stiff consequences for trying to back out of a purchase contract outside of the above reasons. In standard real estate governing laws, there is a “specific performance” provision that allows a buyer to enforce the seller make good on their agreement to sell the home. This will however require taking the seller to court to prove they are not honoring the contract. This is a process that could take years. If a buyer is not willing to invest the time and money to get the home they can sue for smaller issues while shopping for a new home, such as recouping the costs of money spent in attempting to purchase the home.
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