When can a seller back out of a contract? There are a number of reasons why a seller or a buyer can cancel a deal. Sign up for Ilyce Glink’s Love, Money + Real Estate Newsletter for more stories like these.

Why Do Sellers Back Out of a Contract?

I’ve been asked this question fairly frequently over the years. In the past, sellers wanted to get out of a contract because something happened that made them want to stay in the home longer than planned. Some obvious reasons why a seller might want to back out of a contract:

  • You or your spouse/partner lose your job or have a forced reduction in income. That makes it impossible to qualify for a new loan
  • Your spouse/partner dies. You now can’t envision selling the home you’ve lived in together or even the work associated with packing and moving
  • You or your spouse/partner lose a job opportunity in another city, which was why you were moving
  • The home you were buying falls through and you realize you have nowhere to go if you close on your sale
  • You or your spouse suddenly face a medical emergency. The new home you’re buying will no longer work as well as the current home you’re already living in
  • Your child suddenly needs the school or services your local school district, neighborhood, or doctors provide
  • You or your spouse/partner suffer a financial setback, making your new, more expensive home purchase financially impossible

There could be many other reasons why a seller would want to back out of a home sale. 

When Can a Seller Back Out of a Contract?

Now that we know why a seller might want to back out of a home sale deal, the question is when can that happen. 

First, you must understand that a seller (like a buyer) is bound by the terms of the agreement. These days, many buyers are desperate to buy a home. They aren’t inclined to let sellers out of the deal, even if the seller agrees to monetary damages.

A buyer doesn’t have to recognize that the seller has:

  • New medical conditions that make moving tough
  • A death, job loss or other personal tragedy that may change your circumstances
  • A change in family status that may change your ability to qualify for a new mortgage
  • A physical catastrophe, such as a flood or fire that destroys some or all of the property

Likewise, if the seller wanted the sale to close, they wouldn’t have to recognize any of these extraordinary circumstances and allow the buyer to cancel.  But when can a seller back out of a deal? Unless contingencies are included in the contract, such as the seller must close on a home prior to the sale of the current residence, there are no hard and fast rules about when a seller can cancel a contract.

Write a Sales Agreement That Gives You an Out – If You Need It

If you think you might want the option of canceling, write some contingencies into your agreement. Your sales contract can include clauses that will give you an out in case of illness or death. It can also include casualty and property destruction issues. It could include a clause that says you must be admitted to a specific golf club or approved by a specific building’s co-op board. Almost no contracts automatically include a clause that determines what will happen in case of death, since buyers assume your heirs (or the executor) will step up to close the deal. And, if the agreement is “silent” on what happens in case of illness or death, the contract continues to be enforceable, says real estate attorney Sam Tamkin, of Lawproblems.com

Default Clauses

A default clause describes what happens when a buyer or seller defaults under the contract. If the case goes to trial, a judge will decide what remedies are available. Some contracts provide that in case of default, the parties will go to arbitration. Your attorney should review the agreement to see whether everything was done properly. If not, then you may be able to cancel the agreement.

You may be within your legal right to cancel the agreement if the contract was not signed properly, with proper notice provided.

Read More about Canceling a Contract

When Can A Seller Back Out of a Contract from LawProblems.com

Can I Back Out of a Contract for Medical Reasons?

Can You Sell Your Home If It’s In a Living Trust? 

And, if you decide to go ahead and sell:

How to Transfer Utilities from Seller to Buyer

It’s the Buyer’s Responsibility to Change the Name on the Utilities

What to Do if You Can’t Afford a New Septic System

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