Can Home Sellers Terminate a Sale

By
Real Estate Agent with RE/MAX Executive Realty 91362

Can you change your mind if you have agreed to sell your home and signed a contract with the buyer? If you find yourself in this situation, you can back out of a sale in some limited situations.

If you cancel a purchase agreement, however, you could face litigation and more expenses. When you want to cancel the sale, you might need to act quickly to avoid costs and to stay in your home.

We will look at can a seller back out of a sale and the things you need to consider if you are in this situation.

Can a Seller Decide Not to Sell After Signing a Contract?

Sellers terminating a sale can happen for many reasons. Something could change, meaning the deadline in the contract no longer meets their requirements, or the deal might not seem as good as it did when they signed.

Some of the common reasons why a seller may want to back out of a contract include the following:

  • Unforeseen events. Perhaps the seller's reason for moving has changed, maybe an expected job offer went away, and they now don’t need to move. A sudden illness could be another reason.
  • Sentimental reasons. When someone has lived in the home for a long time, they might decide they have too many emotions linked to living in the property.
  • Unable to find a new home. If the seller can’t find a suitable house to buy, they might want to stay where they are.
  • Appraisal problems. If the home doesn’t appraise, the seller might not want to reduce the price or negotiate terms, instead choosing to terminate the agreement.

Whatever the reason, the option of a seller canceling the sale is possible in some circumstances. If you decide you don’t want to sell, you should consult a real estate attorney to determine your options.

Sellers CANNOT terminate a sale because they changed their mind. However, contingencies could offer you a way to cancel the contract. Otherwise, you might have to face legal consequences.

When Can a Seller Back Out of a Purchase Agreement Legally?

You must be clear on your available options to ensure you don’t suffer legal penalties when you back out of selling your home. Real estate contingencies and other terms let you terminate the contract.

  • Home sale contingency. With this contingency in the purchase agreement, you can cancel the sale if you can’t find a suitable new home.
  • Appraisal contingency. A buyer might include an appraisal contingency to allow them out of the purchase if the home appraises lower than their offer. This could mean funding from the lender isn’t available. If that happens, a buyer might want to negotiate with the seller to lower the price if they can’t make up the difference. If the seller disagrees with this, the contract can be terminated.
  • Home inspection contingency. Buyers commonly use this contingency should problems be found during the inspection. When issues are found, the buyer normally wants to negotiate repairs with the seller. The seller can refuse and end negotiations, likely leading to the buyer backing out.
  • Attorney review period. Some states have a review period after signing the original purchase contract. You can potentially back out during this period. For example, Massachusetts is a two-contract state. You'll sign an offer purchase and, subsequently, a purchase and sale agreement.
  • Breach of contract. If the buyer doesn’t stick to the terms of the agreement, the seller can end the contract if this isn’t corrected.
  • Disclosure. If the seller wants out of the contract, they can add information to their disclosure statement. This could put off the buyer, but it means this information will also need to be disclosed to buyers in the future.
  • A willing buyer. The buyer might even let you out of the agreement without penalty if you have a good reason.

If you are unsure about any of the terms in your contract or if you can end it, a real estate attorney or other legal professionals should be consulted.

What Could Happen When Terminating a Sale?

If you want to break the contract, you could have serious problems as a seller. The buyer could take you to court, hoping for their purchase to proceed. They might look for damages from the seller if they suffered expenses because of the terminated contract.

It’s not only the buyer that could sue; your listing agent could seek payment of their commission due to breach of contract.

Final Thoughts

If you have any doubts about whether you want to sell your home or not, it is better to be sure of your choice without needing to back out of a sale later on.

Though if you do find you need to terminate the sale, discussing this option with an attorney could help you avoid legal problems. While it is possible to break the contract, it isn’t something you should do lightly.

Posted by

With three decades of experience, Bill Gassett is an authority in the real estate sector. Bill writes informative articles for numerous prestigious real estate sites to help buyers, sellers, and fellow real estate agents. His work has been featured on RIS Media, the National Association of Realtors, Inman News, Placester, Realty Biz News, Credit Sesame, and his own authority resource, Maximum Real Estate Exposure. Reach out to Bill Gassett for his real estate, mortgage, and financial expertise.

Comments (5)

Michael Jacobs
Pasadena, CA
Pasadena And Southern California 818.516.4393

Hello Bill - can is a word that makes many kinds of questions seem like more of a probability than a mere possibility.   Of consequences come.  Sooner and sometimes later.  Unintentionally speaking and otherwise too.  

Dec 17, 2022 10:04 AM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Bill, Wonderful information, very useful info. Happy Saturday, stay warm, Bill

Dec 17, 2022 10:33 AM
Jeff Masich-Scottsdale AZ Associate Broker,MBA,GRI
HomeSmart Real Estate - Scottsdale, AZ
Arizona Homes and Land Group/ Buy or Sell

Very thoughtful and valuable post Bill. Your knowledge and expertise for home Sellers in your area to rely on your insight. Jeff

Dec 17, 2022 12:49 PM
Richard Weeks
Dallas, TX
REALTOR®, Broker

Great information, thanks for sharing.  I hope you have a great day.

Dec 18, 2022 04:22 AM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

There are consequences for every action. This is a good list of things that could allow a seller to terminate a contract. And yes, if a seller is going to terminate, they should speak to an attorney to understand what those consequences might be.

Dec 18, 2022 06:09 AM