After you enter into a contract to sell your home, you might find yourself rethinking that decision. You may have the right to back out of the agreement, but in some cases, you can face legal and financial penalties.
When Can You Legally Choose Not to Proceed?
In many states, the buyer and seller have the legal right to have an attorney review a real estate contract before moving forward. Either party can withdraw from the agreement without penalty within a specific window of opportunity.
Real estate contracts typically contain contingencies that protect the parties. A contingency might give you the legal right to back out.
The contract might contain a contingency stating that the deal will only go ahead if you find a new home before selling your old one. If that doesn’t happen, you can stay put.
If a home inspector discovers a significant problem, the buyer might ask you to have it fixed or to provide a repair credit. If you refuse, the deal can’t move forward.
If the house appraises for less than the price you and the buyer agreed to, the buyer might have trouble getting financing and ask you to reduce the sale price. If you’re not willing to do that, the sale can’t proceed. You can also legally withdraw from the contract if the buyer misses a deadline or fails to meet other terms.
Why Else Might You Want to Back Out?
You might line up a job offer and put your home on the market, then the new job might fall through. You might face an unexpected change in your financial situation or personal circumstances, such as a job loss, pay cut, or illness or death in the family.
It’s common for sellers to get cold feet for emotional reasons. When it comes time to part with the home where you have lived for decades, you might realize that you’re too attached to leave.
You might simply change your mind. You might be excited when you get an offer, then realize that the terms aren’t as attractive as they initially seemed.
What Are the Potential Consequences of Withdrawing from the Agreement?
If you back out because of a contingency or another legal right specifically laid out in the contract, you shouldn’t have a problem, as long as you comply with the terms of the agreement. If you choose not to move forward for another reason, you can face penalties.
The buyer might sue you and force you to sell the house or seek damages for financial costs that the buyer incurred because you pulled out of the agreement. Your real estate agent might take legal action to seek compensation for lost commission.
What Should You Do If You’re Having Second Thoughts?
If you’re thinking about backing out of a contract, seek legal advice. You can also be frank with the buyer about your circumstances and concerns. A sympathetic buyer might release you from the contract in exchange for financial compensation.
