Similar to buyers, sellers can get cold feet. Between all the work you did to make your house a home and the family you created there, it can be hard to let go of the emotional attachment. And even if you don’t have cold feet, there are loads of other reasons you may decide it is not the right time.
But unlike buyers, sellers can’t back outside and forfeit their earnest deposit money (usually 1-3 percent of the offer price). If you choose to cancel a deal when the home is already under contract, you can be either legally forced to close anyway or sued for financial damages. Of course, the specific consequences are based on the terms of your sales contract for the house.
Is a purchase agreement legally binding?
Most experienced realtors will tell you that a written and signed purchase agreement is a legally binding document, which is precisely why canceling the deal can be so complicated.
Reasons sellers walk away from closing
Often times, a majority of the time, sellers are motivated to sell, however, there are cases where the seller changes their mind.
Here are some of the most notable reasons.
Seller’s guilt: You get chilly feet, either because of your emotional connection to the home or because you’re afraid the new buyer will not take decent care of the property or will make too many changes.
Lack of adequate replacement home: You may have listed your home before finding a new one that fits your lifestyle and needs. If you can’t find a home that checks all the boxes, then you might stay in your current home.
Lifestyle change: Your home needs can change quickly if you experience a life event, such as, for instance, a job transfer, a job offer that falls through, a pregnancy or an illness in the family.
Low appraisal: If your buyer’s bank-ordered appraisal comes back below the offer price and you are not willing to reduce the price, you may be able to refuse to negotiate and cancel the deal. Note that if your buyer hasn’t included an appraisal contingency in their offer, negotiating through this time period is not likely.
When can a seller cancel a purchase agreement?
Simply put, sellers have far fewer choices for backing out of a written real estate seller contract for your house than buyers do. Here are a few instances where you might be able to cancel your contract:
If you only have a verbal agreement: If you have just a verbal contract, you will have an easier time backing out because of the statute of frauds, which states that any contract for the sale of land should be in writing to be enforceable. This statute is enforceable in most states, but as with any issues related to a legal contract, make certain to ask an attorney.
If the contract is unsigned: A contract isn’t enforceable if it hasn’t been signed.
If you have a new home contingency: This contingency allows you to back out if you can’t find a new home that fits your requirements. It’s something that will be composed in to your original contract with the buyer.
In an attorney review: An attorney review period is a three- to five-day period where sellers can cancel based on their attorney’s review of the contract. In some states, an attorney review period is a mandatory part of every contract. If it’s not mandatory in your state, it is something that can be added to the original contract and something your agent may include as standard process.
If the buyer agrees to the cancellation: If the buyer sympathizes with your cause, they may let you out of the agreement without suing.
By sharing more negatives than necessary: Sellers sometimes tell the buyer greater than is legally required in the disclosure process, even if the issues have been repaired, in hopes of deterring the buyer. Depending on the laws of your state, though, if you disclose something to a single buyer, you’ll also have to disclose it to future buyers.
By capitalizing on buyer contingencies: Buyers often place numerous contingencies within their offer, such as a home inspection contingency or an appraisal contingency. By refusing to negotiate after the findings of these reports, you can derail a deal.
Home inspection contingency: In this case, the buyer’s inspection comes back with some red flags related to home repairs or issues. If the seller refuses to either pay for some or all repairs or offer a credit so the buyer can complete the repairs, the deal may be canceled.
Financing contingency: If the buyer is unable to ensure the financing they need to purchase the home, the deal may be canceled.
Appraisal Settlement: Financing might also be denied if the appraisal on the home, which is dictated by the buyer’s lender, comes back lower than the offer amount and the buyer doesn’t want to or can’t make the difference in cash.
Notice that cash buyers may sometimes request an appraisal for their own peace of mind, and they can back out if they’re not satisfied with the appraisal report, assuming they have a contingency within their contract.