Can I Back Out of a Sale if I Already Accepted an Offer?
Feb. 21, 2023
A hot real estate market during the pandemic has slowed due to the Federal Reserve’s raising of interest rates to combat inflation by cooling the economy. Nonetheless, homeowners still put their properties up for sale for various reasons – to relocate to a different neighborhood, city, or state; to downsize because the children have moved out; to cash out for retirement; or even simply to reduce their monthly expenses.
Whatever the reason for selling a home, what happens if a seller suddenly changes their mind? If there are no accepted offers, they can simply take the residence off the market, but if they’ve already accepted an offer but want to back out for any reason, can they legitimately do this?
Simply put, the answer is complicated. A signed real estate contract is binding, and though standardized real estate contracts contain contingencies, they favor the buyer, not the seller. If you’ve accepted an offer on your home in or around Woodbridge, New Jersey, and have seller’s remorse and wish to cancel the transaction, contact me at Adams, Cassese & Papp L.L.C.
I am an experienced real estate attorney who will assess the circumstances, review the contract, and advise you of your options going forward. I also proudly serve clients in Sayreville, Perth Amboy, and Edison.
Reasons a Seller May Want to Back Out
Sellers can be moved to back out of a sales transaction for different reasons. They may suddenly realize they’ll miss their residence of many years or decades. They may also have not been able to find another suitable property to make their own. A higher offer may have come in after the one they accepted, and they want the added profit. Other circumstances may also have changed – perhaps a spouse or family member falls ill and cannot easily be relocated.
Whatever the reason, the seller must find a legitimate way to cancel the deal they’ve already agreed to, but this can be a tough proposition. After all, once both parties have signed the sales agreement, it is legally binding. And, standardized real estate contracts have contingencies that favor the buyer, not the seller.
Legitimate Ways to Back Out as a Seller
Unless you have an attorney add seller-friendly contingencies to the sales contract, the seller is going to have to find ways to get the buyer to back out. For example, buyers in their contracts have a right to home inspections, and more than 80 percent of the time, these inspections will find problems with the home. If the buyer requests that repairs be made, the seller can refuse in hopes the buyer will then change their mind and quit the deal. It may be a long shot, but it’s possible.
It's also possible that the buyer, in seeking their mortgage, receives an appraisal that is lower than the price agreed upon. This is a pretty tricky situation since both buyer and seller have agreed upon a sales price. However, without a seller-friendly appraisal contingency in the contract, the seller may not be able to cancel the contract. The seller can just hope that the buyer will back out because they can’t obtain appropriate financing.
Another way for a seller to cancel the contract is by showing that the seller is involved in fraud. Scam artists often prey on the elderly by making offers at an incredibly low price. The offer would have to be more than lowball to qualify for a fraud-out mechanism, however.
Protect Yourself in the Contract
The best route to protecting yourself in a home sale is to have contingencies added to the sales contract. You can include a suitable housing contingency that allows you to back out if you can’t find a residence you can afford or that otherwise doesn’t meet your goals. You can also include an appraisal contingency to protect yourself if the appraisal comes in low. Likewise, you can fold in a financing contingency that places a time limit on the buyer to obtain financing.
Penalties for Canceling a Contract
If you as a seller cannot find a legitimate means to cancel a contract, but you do so anyway, you can face a breach of contract lawsuit. If the buyer prevails in their legal action, you can be forced to sell and move out with little notice. You can also have a lien placed on your home so you cannot sell it to anyone else. Finally, your selling agent may also sue you for lost commission.
Trusted Legal Counsel: Adams, Cassese & Papp L.L.C.
Without contractual contingencies, you as a seller can face a difficult legal challenge to cancel a real estate sales contract. You may literally have to pay the buyer to back out if you can’t find another legal option for canceling your contract.
If you’ve already signed a contract with a buyer – remember, oral contracts are not binding in real estate transactions – and you wish to back out, contact me at my Woodbridge, New Jersey, firm. I will assess the circumstances and advise you of your legal options going forward. No matter your needs, I am here for you.