Purchasing a house starts with preparing one’s finances and ends with the transfer of the title at closing. In between all these, the seller – as well as the buyer – may still decide to cancel the transaction.
When can a seller back out of a home sale? Is this legal? It might be unfavorable to the buyer, but yes, sellers can back out of a home sale for select reasons and within specific timetables.
Here are some reasons sellers usually get cold feet when selling their property.
- Emotional attachment : Sometimes people change their mind, especially when letting go of a property that has immense sentimental value to them. As the closing date nears, the idea of turning over their home to another person becomes all too real. For some sellers, the emotion can be overwhelming, which may lead them to cancel the sale.
- The seller cannot find a new house to move into: Housing issues are not uncommon and some sellers miscalculate the time between selling their home and finding a new one. In instances like this, the seller might turn down the offer and back out of the sale.
- Sudden major event in the seller’s personal life: This includes unexpected events such as a pregnancy, illness, injury, loss of a loved one, or closing down of a business. With significant life changes happening in the seller’s life, they might want to hold off any other major events, such as selling the house and moving to a new one.
- Disagreement in appraisal: At times, the home appraisal might reveal a value lower than the offer price, and the seller might refuse to lower the price or negotiate. If the buyer and seller can’t reach an agreement, the seller might decide to cancel the sale.
What if an agreed offer or Purchase Agreement has already been signed?
A Purchase Agreement is meant to protect both sellers and buyers from unexpected actions by the other party, including backing out of the sale. Legally, sellers are prohibited from entering another home purchase agreement if a contract with another buyer is already in place.
There are several ways a seller can get out of a Purchase Agreement legally:
- If the buyer agrees to cancel the sale. If the seller changes their mind about selling the home, the first and often least contentious recourse is to talk to the buyer, discuss their situation, and get the buyer to agree amicably to the cancellation.
- If any of the contingencies in the Purchase Agreement are not met. Contingencies in a Purchase Agreement allow the buyer and the seller to back out of the sale should worst case scenarios happen, including when the seller is unable to find a new home to move into. This is why it’s very important to have the right contingencies in the agreement from the onset.
- The cancellation is within the Attorney Review period. If the Purchase Agreement includes an attorney review period, which is usually five days from the signing of the contract, the seller may be able to cancel the sale without legal consequences.
What can a buyer do in case a seller backs out?
If the seller backs out of the home sale without adhering to the terms and conditions of the contract or without communicating properly with the buyer, some actions that the buyer can do include:
- Take legal action on the breach of contract and sue for damages including cost incurred on inspection, deposit, and legal assistance to name a few.
- Request legal assistance from the court for “specific performance” which ensures the home sale is completed, regardless if the seller agrees.
- Request for a mediation process – this means a third-party facilitator who can help the buyer and seller find a common ground and agree on the next steps.
Are you a home buyer looking for your next real estate purchase or a seller asking yourself “how to sell my house fast in California?” Either way, working with the real estate professionals from Yoshikane-Toyama Real Estate Group can get you the best value for your investment. Call them today at 714.501.7132, or send them an email here.