If you need to back out of your sale, you have options — we'll walk you through them.
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Just like buyers, sellers can get cold feet. Between all the work you did to make your house a home and the family memories 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 plenty of other reasons you might decide it’s not the right time to sell.
But unlike buyers, sellers can't back out and forfeit their earnest deposit money (usually 1-3 percent of the offer price). If you decide 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 depend on the terms of your sales contract for the house.
Yes, a written and signed purchase agreement is a legally binding document, which is why canceling the deal can be so complicated.
In the majority of cases, sellers are motivated to sell and ready to close, but there are cases where the seller changes their mind. Here are some of the most common reasons.
Seller's remorse: You get cold feet, either because of your emotional connection to the home or because you're afraid the new buyer won't take good 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, you might stay in your current home.
Lifestyle change: Your housing needs can change quickly if you experience a life event, like 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're not willing to lower 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 during this pre-close time period is unlikely.
Simply put, sellers have far fewer options 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 only 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 must be in writing to be enforceable. This statute is enforceable in most states, but as with any issues related to a legal contract, be sure 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 needs. It's something that would be written into 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 signed contract. In some states, an attorney review period is a mandatory part of every contract. If it's not mandatory in your state, it's something that can be added to the original contract and something your agent may include as standard procedure.
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 more than is legally required in the disclosure process, even if the problems have been repaired, in hopes of deterring the buyer. Depending on the laws of your state, though, if you disclose something to one buyer, you’ll also have to disclose it to future buyers.
By capitalizing on buyer contingencies: Buyers often put multiple contingencies in 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.
You can face legal and financial ramifications from both the buyer and your listing agent if you decide to back out of the contract unexpectedly and without a contingency that specifically lets you out of the deal. According to standard real estate contract law, here are some of the penalties you may face.
nZillow Group, Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers before engaging in any transaction.
Specific performance refers to the breach of contract by one party. Instead of a monetary reward, the court can order the party to perform the duties outlined in the contract — in this case, order you to complete the sale of the home and transfer the title to the buyer. While the buyer can take the seller to court and force them to move forward with the deal, buyers don't often take this path, given the legal costs and how long it takes.
Another option the buyer can pursue is to sue for damages caused by the breach of contract, including:
When you cancel a deal unexpectedly, you are not only in breach of contract with the buyer but also in breach of your seller's agreement with your listing agent (sometimes called an 'exclusive right to sell').
If you cancel your contract with your agent before closing, they can sue you to recoup lost marketing costs. Examples include money spent on photography, staging, advertising or open houses.
Your listing agent also does a lot of work upfront to find you a buyer, and they're not compensated until the deal closes, when they receive their commission (usually around 6 percent of the sale price, half of which is given to the buyer's agent). If you call off the deal after the agent has put in a lot of time, you could be sued for their commission, especially if they successfully found you a buyer.
If you need to back out of the deal, you might be able to minimize financial and legal repercussions by doing some of the following:
It's usually easier to pay the buyer some amount of damages upfront rather than going to court. You might be able to approach the buyer and see what they want to be reimbursed for in exchange for canceling the deal, and you could avoid the time and expense of a court case.
If you are facing some kind of hardship that's causing you to back out of the deal, the buyer might sympathize with you if you communicate your reasoning in writing.
As with any legal or contract issue, it's best to consult with your attorney to determine the course of action that will minimize your financial burden and legal liability.
It's normal to get cold feet. Instead of immediately backing out, think about the initial reasons you decided to sell. Chances are these reasons still hold true, and perhaps you're just experiencing a temporary feeling of remorse that will fade with time.
But if you're worried about the historical significance of the property, you can also speak to the buyer to alleviate concerns over future renovations or changes they plan to make. Just remember that once you sell, you have no control over what they actually decide to do with the home, regardless of any conversations you have.
