Can a Seller Back Out of an Accepted Offer?

May 18th 2024
Yes, a seller can back out of an accepted offer before closing, but there are consequences and conditions to consider. Common reasons for backing out include emotional attachment, inability to find another home, life events, low appraisals, and buyer contingencies.

This article explains what happens if a seller backs out of an accepted offer and the options available to the buyer. It covers the seller's rights and legal consequences, detailing how a home purchase agreement dictates when a seller can legally back out. Additionally, it clarifies that a seller cannot accept another offer once under contract. The article also discusses the potential legal actions a buyer can take if a seller backs out without a valid reason and provides steps for sellers to minimize legal and financial consequences if they need to cancel a sale.

hash-markCan a Seller Back Out of a Contract (Home Purchase Agreement)

A seller can back out of a contract to sell a home, but there may be legal consequences for doing so. The home purchase agreement will detail when a seller can back out of the contract and for what reasons. In real estate, the contract that governs the sale of a house is called the home purchase agreement (sometimes known as a buyer-seller agreement) and it outlines the details of the transaction.

A well-written home purchase agreement will contain a set of contingencies that must be met and abided to for the sale to go through. These contingencies are important and should be carefully understood by both parties, as they define when a buyer or seller can back out of a sale without legal consequences. If either party backs out of the contract for a reason that is not stipulated in the purchase agreement, then there may be a potential penalty. If the seller tries to back out without a legitimate reason, the buyer may even be able to take the seller to court to try and force the sale.

Once the details of the home purchase agreement have been defined and both parties have signed the contract, the sale is then considered to be in the “under contract”. Purchase agreements are prepared by a lawyer and are usually written up by the buyer’s agent. 

hash-markReasons a Seller Might Back Out of an Accepted Offer Before Closing

To put it simply, a seller can back out at any point if contingencies outlined in the home purchase agreement are not met. These agreements are legally binding contracts, which is why backing out of them can be complicated, and something that most people want to avoid. There are, however, several common reasons why a seller might get cold feet and walk away from a deal. Here are some reasons why they might decide they no longer want to sell:

  • They get cold feet, usually because of emotional attachment to a house or concern about the new owners, and decide to take the house off the market.
  • They can’t find another home to move into. This one is common when their purchase falls through on a new home they were looking to purchase. Without anywhere to go, lack of replacement housing may mean a seller is no longer able to part ways with their current home.
  • A life event, such as a pregnancy or death in the family, may also prevent them from being able to follow through with the sale.
  • A low appraisal can be detrimental to a sale on the seller’s end, and if they’re unwilling to lower the sale price to match the appraisal value, this can cause the seller to cancel the deal.

hash-markCan a Seller Accept Another Offer While Under Contract?

Often, people wonder if a seller can back out should they receive a better offer from another potential buyer. This is an understandably worrisome scenario, particularly if you enter into a contract on a highly desirable home. You don’t want someone else swooping in and snatching it right out from under your nose! But not to worry, once an offer has been accepted and a contract signed, sellers can no longer accept another offer from a different party. 

hash-markCan a Seller Back Out of a Purchase Agreement?

A seller can back out of a contract to sell a home, but there may be legal consequences for doing so. The home purchase agreement, also known as the buyer-seller agreement, outlines the details of the transaction and specifies when a seller can back out of the contract and for what reasons.

Legal Protection for Both Parties

Purchase agreements are designed to protect both parties since selling a home can be costly and time-consuming. If you have a contractual agreement with a seller, they are legally barred from entering into another home purchase agreement with a different buyer. Both parties and their agents should be aware of this to handle such situations effectively.

Understandable vs. Legal Reasons

While there may be understandable reasons for a seller to change their mind about selling, these reasons are not always legal. Sellers often have fewer legal options to back out of a contract without facing penalties compared to buyers.

Avoiding Mistakes 

The most obvious reason a seller could cancel the sale is if the agreement was verbal or the contract was never signed. These are easily avoidable mistakes, especially with diligent agents involved. Always ensure that a transaction deal is written up and signed.

Using Buyer Contingencies

One common way for a seller to back out without legal consequences is by capitalizing on the buyers’ contingencies. For example, a seller might refuse to negotiate certain aspects of the contract, such as home inspection repairs, pushing the buyer to cancel the contract on their end.

New Home Contingency

A frequent scenario where a seller backs out is when they cannot find a replacement home. Often, a new home contingency is included in the purchase agreement, allowing the seller to back out if they cannot find a suitable replacement home. The seller might also walk away during the attorney review period, a three to five-day window in which the contract can be canceled based on the attorney’s review. Note that some states legally require an attorney review.

Risky Methods

A riskier method for a seller with cold feet is to over-disclose issues with the property in hopes of deterring the buyer and encouraging them to cancel the agreement. However, in some states, anything disclosed to one buyer must also be disclosed to others in the future.

Mutual Agreement to Cancel

Finally, a seller can try to get the buyer to agree to the cancellation, usually in good faith. If the buyer sympathizes with the seller's situation, they may agree to cancel the purchase agreement.

Consequences of Backing Out Without Valid Reasons

If a seller backs out without valid reasons, the buyer can sue for specific performance or damages. Specific performance means the court can order the seller to complete the contract, involving the sale and transfer of the home. However, this is rare due to the length and cost of legal proceedings.

More commonly, a buyer will sue for damages caused by the breach of contract. These damages often include fees associated with the sale (such as inspection fees), lost deposits, temporary housing costs, or any legal fees.

hash-markHow to Back Out of a Real Estate Contract the Right Way 

If you have a home under contract and need to cancel the deal, follow these steps to minimize legal and financial repercussions:

1. Write a Letter to the Buyer

To back out of a real estate contract start by writing a letter to the buyer explaining your circumstances. If you are experiencing hardship, the buyer might agree to cancel the contract.

2. Offer Compensation

If the buyer doesn’t agree to cancel the contract, offer them some money upfront to cover damages. This approach is often more advisable and cheaper than negotiating through the court system.

3. Plan Ahead

To avoid potential issues, think carefully before agreeing to a sale. Ensure you thoroughly read and understand the contingencies outlined in your home purchase agreement before signing.

4. Cover Yourself

Make sure you are protected by the contingencies in your contract in case you need to back out suddenly. This preparation can save you from significant problems down the line.

By following these steps, you can handle the process more smoothly and reduce the risk of legal and financial complications.

hash-markCan a Seller Back Out of an Accepted Offer Bottom Line

Navigating the home-buying process can be challenging, especially when a seller backs out of an accepted offer. While sellers do have the ability to change their minds, doing so can lead to significant legal and financial consequences. It's crucial for both buyers and sellers to understand the terms of their home purchase agreement and to seek legal advice if issues arise.

Ultimately, clear communication and thorough understanding of the contract can help prevent complications and ensure a smoother transaction for everyone involved.