Mortgage Advice & Articles

Ask an expert: Seller backing out of contract

A: In the case of most real estate deals, once you and the seller have signed a contract, neither party can back out without consequences. There are some contracts, however, that have clauses that allow a seller (or buyer) to cancel if certain conditions are not met.

Most conditions in a real estate contract are designed to protect the buyer. For example, you may make an offer conditional upon being approved for a mortgage, or pending a home inspection. If your financing falls through, or the inspector finds a termite infestation, these clauses allow you to get out of the deal without penalty.

Sellers may include similar “escape clauses” in the contract. In situations where a house is part of an estate sale, for example, the contract might state that the deal must be approved by other family members. If you accept this condition when you sign, the seller is able to back out if the condition isn’t met.

When a seller attempts to back out of a contract without such conditions, however, a buyer may be able to sue for financial damages. The buyer may even be able to get the court to order the seller to fulfill the terms of the contract. (The seller’s real estate agent, too, may be able to sue for his or her commission.) The specific consequences will depend upon the terms of the contract and the state you live in, but, in general, a seller is not entitled to renege because of a change of heart.

Buying a home is stressful enough without worrying about taking the seller to court. That’s why you should work with your agent and a real estate lawyer before you sign the contract, to make sure it does not allow the seller to back out for arbitrary reasons. If you do find yourself in this situation after the fact, contact a real estate lawyer immediately to determine your options. 

 

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