It is quite possible that either a Seller or Buyer might change their mind about the sale/purchase of a home.
While it is more common for the buyer to try to back out, there are occasions when the seller might also have a change of heart and request to back out of the Purchase and Sale Agreement.
Reasons A Seller Might Try To Back Out:
- Can I get a better deal?
- Appraisal is too low
- New job did not go through
- Emotional attachment to family home
- Unable to find suitable housing
As the Seller, you can usually back out of the sale without ramifications under the following circumstances:
Before the contract is signed: Most often, a contract is reviewed by attorneys prior to each party signing. During the review phase, the Seller or Buyer may terminate the sale for any reason without consequence.
The Seller included a contingency in the contract allowing them to back out, such as the need to find suitable housing.
The Seller is unwilling to lower price/make requested repairs as requested by Buyer after issues are found upon appraisal.
If the Seller insists on backing out of the deal when they do not fall into the above categories, they will likely face consequences. The laws that govern real estate transactions force the Seller to honor obligations under the contract. The buyer may choose to take the seller to court to enforce the sale, which will likely take time. The buyer could also sue for money spent on temporary housing, storage, costs of inspections, lawyers and various other fees.
Reasons A Buyer Might Try to Back Out:
- Unable to secure mortgage
- Seller unwilling to make requested repairs
- Loss/Change of job situation
- Unable to sell existing home
As the Buyer, you have most likely paid earnest money once the Seller accepted your offer. This is generally 1% – 2% of the agreed upon price and paid to show the buyer is serious about the purchase. If you decide to back out of the purchase after the money is paid, there are scenarios in which the buyer can recoup the money. The below are contingencies that could fit this scenario if stated within the contract:
If the property does not appraise for the purchase price and a mutual agreement cannot be made, the Buyer may exit the contract.
The buyer might use the Inspection Contingency to exit the contract if the inspection reveals more issues with the home that originally disclosed, such as wiring issues, cracked foundation, etc.
If you are unable to sell your existing home or if your sale falls though, the Home Sale Contingency can come into play allowing you to back out without penalty.
When purchasing a property within a HOA, the HOA will release documents for review. These documents will include the rules and regulations that must be followed once you own the home. Though review periods will vary by state, you may withdraw your offer on the home within the review period without penalty.