Can You Back Out of Selling a Home?

new home under contract can you back out of selling home

It’s best to be completely sure about selling before taking the plunge to put a house on the market—obviously. And while it doesn’t happen often, a seller sometimes wants out of an agreement. Deciding to keep a home is not a decision that should be taken lightly. 

It’s possible to change your mind about selling your house... but it’s not a good idea. It will cost you. Just how much it will cost depends on how far along you are in the home selling process.

Reasons for Backing Out of a Home Sale

The choice to back out of selling a home is usually more complicated than just deciding not to move. A seller simply getting cold feet does sometimes happen, but that’s more likely to happen to a buyer. 

Sometimes a homeowner has valid motives to want to get out of a contract. For example, if the purchase of their new home falls through or they lose their job. Or, if they are planning to move far away for a job transfer that ends up not happening. 

Other reasons are harder to defend and can cross the line into being unethical. Wanting to take a better offer after one has already been accepted, for instance, will get a home seller into financial—and legal—trouble.

Backing Out of a Listing Agreement

Before they’ve found a buyer, a home seller only has their listing agreement with their real estate agent to worry about. Backing out at this early stage of the process is less problematic, but can still cost some money.

Agents start working for their clients immediately upon signing the listing agreement. They spend time and money on marketing, staging the home, and showings. If a homeowner reneges on the agreement, they will expect financial reimbursement for their expenses.

It is best to inform the real estate agent immediately about deciding not to sell. They can pull the listing and cancel any upcoming open houses and marketing efforts. If they’re kept in the dark, they will continue to work on selling the home, racking up more expenses.

Some listing agreements lock a seller into a timeframe during which they can not sign with another agent or sell the house themselves. If the homeowner has changed their mind completely about selling, it won’t be a big deal to let the agreement lapse. If, however, they change their mind again, they may have trouble listing with anyone else. If they have reimbursed the agent fully for expenses, they may have a better chance of being released from the contract.

A lot will depend on how sympathetic the realtor is to the homeowner’s situation. The leasing agreement is a legal document, so the agent can choose to sue the homeowner for their losses related to the breach of contract. 

Consequences of Backing Out of a Sales Contract

home contract back out of selling a home

When a seller has found a buyer and the home is under contract, the stakes become much higher. If a buyer backs out at this point, they stand to lose their earnest money. The seller faces some steep consequences too. Sure, they may be able to stay in the home, but they will need to make up for the inconvenience they have caused for the buyer and the real estate agent.

In addition to all of the marketing time and money put into selling the home, the agent may have gone to considerable effort in negotiating the sale. Just as when there was only a listing agreement, the seller will be liable for those costs. The agent may also demand payment for lost commissions. 

On top of the realtor’s expenses, a seller who changes his or her mind is liable for the buyer’s costs too. Breaching the contract puts the seller on the hook for money the buyer has spent during the process. This can include:

  • The cost of temporary housing
  • Furniture storage costs 
  • Inspector’s fees
  • Attorney’s fees
  • HOA application fees

The buyer can sue the seller for damages to recoup their out-of-pocket expenses. If the buyer is still serious about wanting the house, they can go to court to force the seller to complete the sale. This, of course, takes time and more money, so most buyers won’t go this far. Instead, they will opt to find another home. But it is a possibility when a legal contract is broken, so the risk should be fully considered before deciding to back out of selling a home.

5 Legal Ways to Stop a Home Sale

There are legitimate ways to get out of a sales contract when selling a home. If a seller falls into one of these legal scenarios, they may still pay some penalty, but it is much less likely that they will lose their home:

  1. If they back out before signing a contract with the buyer. They may still be liable to a real estate agent for marketing and listing expenses. These will be much less than the potential cost of inconveniencing a potential buyer.
  2. If the contract is in the “attorney review period.” There is typically a 3 to 5-day window when the attorneys review the contracts. A seller can safely back out during this time.
  3. If the buyer breaks the contract. For example, if they can’t secure a mortgage within the timeframe listed in the contract, the seller has no obligation to uphold their end of the deal. This might happen if the appraisal comes in much lower than expected, and the bank won’t loan the full amount of the offer.
  4. When a buyer demands home repairs that the seller refuses to do. This is a situation where further negotiations are necessary rather than a breach of contract. The buyer and seller can adjust the price accordingly and move forward. If these specific repairs aren’t listed in the contract, the seller has the right to back out if they can’t come to an agreement.
  5. If there are contingencies in the contract. A contract can include just about any “escape clause” the seller wants. If, for example, it states that the seller can back out if they do not receive their expected promotion, or if they can not find a suitable home within a certain amount of time.

No matter what type of contingencies are in a contract, a determined buyer can still try to purchase the home. Although few people would probably go to the trouble and cost of going to court, a judge could ultimately decide if the seller can keep the house.   

Avoiding Damage to Wallet and Reputation

The most basic safeguard for a homeowner is to make sure you are serious about selling before going through the trouble of contacting an agent. Once the house is on the market, the meter is running, so to speak. The cost of backing out can add up fast. 

If some unforeseen event occurs, communicate with the realtor and buyer immediately. Being honest with them can help the chances of gaining their sympathy and not being taken to court. Backing out of a sale without an explanation could make a real estate agent hesitant to work with you again. When you finally decide to move forward with selling your home, you will want to be sure you haven’t burned any bridges.

Finally, find an experienced real estate agent like the ones at Berkshire Hathaway HomeServices Select Properties. They will work with you to craft a contract that includes the contingencies that will make you feel confident to move ahead with your sale.

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