All the work in preparing the property to list for sale is done, the listing is live and the offers start rolling in. Things are looking great and the seller accepts a fantastic offer for the price and terms they were looking for. A few days go by and rather than the usual celebratory feelings most sellers have once getting their home under contract, the twinges of regret set in and now the attempt to reverse course sets in. Seems easy enough to cancel the contract and pull the home off the market, right? The short answer to that question is: No.
While it is rare for a seller to try to back out, the most common reasons for a seller trying to back out of a contract include: a higher offer comes in; a change in circumstances, such as a relocation for employment falling through; a seller having nowhere to go because they failed to find a replacement property or rental or finally, the seller getting cold feet. The memories of the home start flooding in. Every home they look at just isn't the same as the one they are selling and the fear of regret fuels a seller's remorse and cold feet.
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Real estate contracts are legally binding, and it is anything but easy for a seller to back out once accepted. While most real estate contracts contain termination clauses, those are generally built-in to protect the buyers, not the seller. Once the contract is in place it is essentially the buyer in the driver's seat as to whether they cancel a transaction.
Real estate law heavily favors the buyer and in the event a seller tries to back out of a contract, the seller can face some serious and expensive blowback. Unless the seller has written in a home-sale contingency or the buyer fails to uphold their duties under the contract, it is very difficult for a seller to have grounds to terminate the agreement under real estate law.
So, what happens in the event a seller cancels a contract, even though they have no legal grounds to do so? The buyer can force the seller to complete the sale under "specific performance," which is legalese for completing the transaction under the terms of the legally binding contract. The buyer can sue the seller and claim punitive and liquidated damages for compensation of the loss of the home, damages for the money they have already spent on the property (i.e. home inspection, well inspections, appraisal fees) and the buyer's legal fees.
The listing broker can also sue the seller. Not only did the seller sign a contract with the buyer, but also signed a contract with the listing broker. Failure to complete the contract does give a listing broker grounds to go for the promised commission, even though the sale did not close. This is because the listing broker performed their contracted agreement in bringing a viable buyer willing and contracted to purchase the property under the listing contract.
The long and short of it is that a seller should have a very clear understanding of the real estate contract terms and repercussions of terminating a real estate purchase agreement/contract. Be sure to have a clear path and plan prior to offering the property on the open market for sale as to timing, replacement properties and a clear understanding of why they are selling their property. It can save a lot of headache, heartache and costly legal repercussions.