Can I Back Out of Selling My House Before Closing?

The vast majority of real estate contracts make it to the closing table. One survey between March and May 2022 found that only 7% of real estate contracts fell through once both parties agreed to the terms. However, there are times when the buyer won’t be able to purchase the home or the seller will decide to back out. 

This guide will help buyers and sellers if the owner doesn’t want to move forward with the home sale. Buyers can learn why sellers might pull back while sellers can learn their legal and ethical options for ending a transaction. The goal is for everyone to act fairly – even if it means the buyer needs to resume their home search.

Here’s an answer to, “Can I back out of selling my house before closing?” and what that means for everyone involved.  

Why Would a Seller Back Out?

There are multiple reasons why a seller would end a real estate contract. These range from personal complications to economic reasons and problems with the buyer.

The reason for canceling a purchase agreement can have financial and legal ramifications for the seller – and will affect how the buyer interacts with the homeowner moving forward. Here are a few reasons why a seller might cancel a deal. 

Personal Reasons

There are times when a homeowner fully intends to sell a property but they have to cancel the deal because life has other plans. In this case, the buyer did nothing wrong in the purchase process but the seller cannot move forward with the sale. Here are a few examples: 

• A homeowner is selling their house to move in with their fiance. The couple breaks up and the homeowner no longer needs to leave their home. 
• A homeowner lists their house because they received a job offer in another state. The employer rescinds the offer so the seller doesn’t need to move. 
• A seller is eager to move to a different state. However, a relative falls ill unexpectedly and they have to cancel their plans. 
• The seller has a change of heart and wants to stay in the home.
• The homeowner is struggling to find a suitable home to move to after they sell their property.

There are also extreme cases when the home sale is disrupted. For example, the homeowner could die before the closing date. Even if the beneficiaries plan to sell the house, the process could be delayed until the will is settled. There’s no way the buyer could have anticipated that. 

The Seller Accepts a Better Offer

Sometimes, the seller acts unfairly toward the buyer. One example is when the seller receives a different offer that is more competitive than the one they originally accepted. In this case, the seller needs to decide whether it is better for them financially to cancel the contract they have with the buyer and move forward with the other one.

Here are a few reasons why the seller might choose another offer: 

• The potential buyer is paying in cash. The seller might feel better about accepting a cash offer that can also speed up the closing window. 
• The offer is above the listing price. This varies from one market to the next. In October 2022, 23% of homes sold over their listing price. The seller might want a higher offer to get more money from the home sale.   
• The offer comes without contingencies. The seller might want to work with a buyer who doesn’t request any home repairs or contingencies that cost time and money. 

Canceling a real estate contract just because a better offer comes around can be expensive for the seller. The offer needs to be significantly better for the seller to risk canceling an accepted offer. The buyer can also sue the seller for breach of contract if this is the case, negating any financial benefits.  

If you receive a better offer, consider saving it as a backup offer in case your current one falls through. If the current buyer fails to hold up their part of the deal, you can cancel the contract and move on. 

The Buyer is Difficult to Work With

It’s not always a seller’s fault that a real estate contract doesn’t go through. Sometimes the buyers prevent negotiations from moving forward and become unreasonable to the point that the seller doesn’t want to deal with them anymore.

They would rather walk away from the sale and start over again. For example: 

• The buyer wants excessive repairs and improvements. The seller might list a home as-is so they don’t have to make repairs, only to encounter a buyer who wants them. 
• The buyer wants specific pieces of furniture. Contracts can break down if the buyer wants specific appliances or items left behind that the seller planned to take with them.
• The purchase process keeps getting delayed. The buyer can delay the purchase by pushing back the closing date if they can’t secure financing or complete the home inspection and appraisal process in time.  

The market and the patience of the homeowner will determine how difficult a buyer is allowed to be. A patient seller who wants to move quickly might continue to work with a difficult buyer if it means the deal will close soon.

However, if a seller has multiple buyers and several other offers, they might walk away from the buyer and work with someone easier instead.

Can Sellers Legally Back Out of Real Estate Contracts?

Determining whether a seller can legally back out of a real estate translation isn’t easy. While anyone can technically stop the translation at any point, there are financial ramifications for both parties depending on the circumstances.

The Buyer Doesn’t Keep Up With Contingencies

Sellers often build contingencies into home sale contracts that the buyer needs to meet. These are usually actionable tasks with deadlines. Asking to put down earnest money is an example of a contingency. If the buyer doesn’t bring the deposit to the title company by the set date, the seller might not think they are serious and move on.   

It’s easiest for the home seller to back out when the buyer isn’t moving the transaction forward. For example, if the terms of the agreement state that the buyer has a week to schedule a home inspection and nothing has been planned, the seller might be wary that the buyer isn’t holding up their end of the bargain.

Similarly, if the home appraisal is lower than expected, the buyer could have difficulty securing financing. The seller might choose to work with another buyer that offered cash.

The seller will prove that the buyer cannot meet the terms of the real estate contract and move to nullify it.

The Seller Has Personal Reasons for Backing Out

If the buyer is keeping up with their contingencies and preparing to purchase the home, the seller cannot blame them for backing out. The seller might have to pay hefty fines for cancelling the contract depending on the terms of the deal. Here are a few repercussions they might face:

• The home seller will have to pay back the earnest money plus interest. 
• The home seller will pay back any fees the buyer accrued for inspections and appraisals. 
• They may need to pay the listing agent part of their commission for securing a buyer. 
• They will likely have to pay the buyer’s legal fees. 

Additionally, the buyer could potentially sue the seller for breach of contract. The seller entered into the home sale agreement and backed out while the buyer was doing their part to close the deal. This can lead to hefty legal fees and potential damages paid to the buyer if the court rules against the seller. 

Buyers can sue for a specific performance – which is an action the seller takes to remedy the situation – or compensatory damages to cover the pain and financial loss of losing the house. In some cases, the buyer could sue to take over the property as their desired performance or compensation.

All of this depends on how litigious your buyer is. Many buyers will simply cut their losses and request the seller pay back any money spent in the purchase process. 

Both Parties Mutually Agree to End the Contract

There are times when both parties agree to stop doing business with each other. The buyer may miss contingency deadlines because they don’t want the home while the seller wishes they had moved forward with a different offer.

When this occurs, both the buyer and home seller can work with a real estate attorney to end the contract. The buyer will start their search for another home while the seller either relists the property or accepts a backup offer. 

Options if a Seller Attempts to Back Out

If you are a buyer who is worried about your seller backing out, know that you have options. You can protect yourself before you enter into a purchase agreement and during the home sale process. Here are a few steps you can take if you are faced with this situation: 

• Make sure you have done everything you agreed to. This way the home seller cannot accuse you of breach of contract. 
• Carefully read the signed real estate contract. Review the terms with your lawyer or buyer’s agent to learn about your rights. 
• Document your expenses. Track how much you have spent on the home purchase since you entered into the purchase contract. These costs include inspection and appraisal fees, rental cancelation fees, and temporary housing costs if you already sold your current home. 
• Start the negotiation process. Work the the seller to end the terms of the purchase agreement. Clearly state how much you expect to recoup your expenses and any emotional damages from the loss of the property. 

The actions of the seller will determine how you move forward from here. Some sellers will agree to your terms, cancel the purchase agreement, and allow both parties to walk away from the deal. However, if the seller wants to cancel your agreement without compensating you, you might need to seek representation from a real estate attorney. 

Decide how much you want to pursue the seller for damages. Lawsuits can be stressful and last several months; however, they also might be the best way to receive the money you are owed. Evaluate your financial needs, legal options, and home purchase goals before moving forward.

Best Practices for Sellers Considering Cancellation

If you are a homeowner who feels you cannot move forward with the sale of the house, take steps to protect yourself as you cancel the real estate contract. Know that your buyer will be upset about losing the house – especially in a highly competitive sellers’ market – and they accrued several expenses in the purchase process. If you are reasonable about canceling the purchase agreement, you could potentially avoid a lawsuit. 

• Talk to your real estate agent. Let your listing agent know you need to cancel the purchase agreement and want to create a plan to move forward. If you aren’t selling the house at all, settle financially with your Realtor if they believe they are owed a commission for their work. 
• Communicate clearly with your buyer. Explain through your agents that you plan to terminate the real estate contract as soon as possible. This will give your buyer time to calculate their costs and move on sooner to other properties. 
• Understand the legal consequences of this action. Your attorney can guide you through any potential risks and how to protect yourself. 
• Be prepared to negotiate with the buyer. You can offer a set amount to cover their damages or wait for the buyer to present their desired monetary compensation to you. Everything in real estate is a negotiation – even a purchase agreement termination – and if you aren’t willing to work with the buyer they could bring a lawsuit against you. 

A trusted lawyer can guide you through each step of this process. Know that if you are difficult to work with, your buyer can also dig their heels in. Real estate contracts are designed to protect both parties if either the buyer or seller isn’t acting fairly.

Think Long-Term When Cancelling a Purchase Agreement

Make sure you understand the full scope of repercussions if you decide to back out of the home sale. Not only will you have to pay the buyer for their losses, but you might have trouble selling your home in the future. 

Local agents try to learn about home sellers before showing properties to their buyers. If they learn that you canceled your last real estate translation and were difficult to work with, agents might dissuade future buyers from looking at your home. They want to protect buyers from entering agreements that could fall through because of the seller. 

In a competitive real estate market, negotiating with difficult sellers might be worth the risk if it means getting into desirable neighborhoods. If you already have a backup offer in place, you might not have to worry about your reputation. However, if you have a hard house to sell or your market isn’t as hot as it could be, selling your home after backing out of a deal could be harder than you expect.  

Know Your Options Before You Sign a Real Estate Contract

Don’t wait until you need to back out of a home sale to review your real estate contract. Hire a Realtor who can walk you through each step of the purchase agreement so you know what is expected of both parties.

Knowing the terms of the contract beforehand can help home sellers if they have difficult buyers or need to back out for personal reasons. If you need to cancel the contract, communicate clearly with all parties involved and do your part to end the real estate transaction peacefully. 

To find a Realtor who can help with this process, turn to FastExpert. You can learn about agents who have experience working with a variety of homeowners and can sell various types of homes. With a trusted partner by your side, you can move forward confidently with your real estate deal.