Can a Seller Back Out of a Signed Real Estate Contract?


It is relatively difficult for a seller to back out of a contract after accepting an offer. Real estate contracts are legally binding, but there are some instances where a seller can back out, especially if certain contingencies aren’t met.  

As the closing date nears, for one reason or another, a seller may decide that they would like to back out of the contract only to find that it’s much more difficult than they first imagined — if it’s even possible at all. As a legally binding document, sellers may or may not be able to back out of the real estate contract depending on the circumstances. 

In this article, you’ll learn everything you need to know about sellers backing out of the contract so that as either a buyer or seller, you’ll know what can and can’t be done once the real estate contract is signed.

Real Estate Contracts Are Legally Binding

A signed real estate contract is a legally binding document. This means that a seller can’t just back out of the deal if they decide to, especially not as easily as a buyer can. Buyers can typically forfeit their earnest money and back out of the deal if they so choose, but sellers are not afforded a similar luxury. 

Once the real estate contract is signed, the seller may be legally responsible to move forward with the deal and close on the property. In some cases, sellers may also be able to pay financial damages to back out. To put it simply, real estate contracts are typically seen to heavily favor — and protect — the buyer rather than the seller.

Why Sellers Might Want to Back Out

Although it might not be easy to back out of a purchase agreement as the seller, there are still several reasons why they might want to try to do so. If you’re planning on selling your home, think about some of the reasons that sellers back out below so that you can best prepare yourself in case any of these thoughts start creeping up after the contract has been signed. 

No Replacement Home

This happens more often than you might think. For one reason or another, the seller has been unsuccessful in finding a new place to move into once their home is sold. Maybe they are in a similar position with the new home, and the deal fell through. Whatever the reason, if a seller has nowhere to go, they might try to back out just to have a place to live.

Seller’s Remorse

One of the most common reasons for a seller backing out is seller’s remorse or getting cold feet. People often get emotionally attached to their homes and don’t really think about not living there anymore until the contract is signed and it’s about time to go. When that reality sets in, sellers may feel so strongly about wanting to stay in their home that they’ll get cold feet and try to back out of the contract. 

Higher Offer

As the closing date approaches, sellers might have a late offer come in that beats the current one, or they might think they accepted too early. This might cause sellers to try to get out of the agreement so that they can find — or accept — an offer that is higher than the one they’ve agreed to.

Something Changes

Often people will sell their home when something in their life changes that causes them to want to move. An example of this is if they’ve accepted a new job in a different location or one that pays more. In this example, if the job offer falls through, the seller may no longer need to move or be unable to afford to move, and try to back out of the deal to sell their home. 

Buyer’s Appraisal too Low

If closing is coming up and the buyer’s bank has appraised the property lower than the offer, the seller may want to back out instead of lowering the price. Luckily for the seller, in this case, they can typically refuse to negotiate and back out of the deal. A buyer may include an appraisal contingency in their offer, in which case negotiations may be necessary.

As gone over here, there are quite a few reasons why you might want to back out as a seller, and whether or not you’re actually able to back out of the real estate contract will depend on the circumstances of the deal. 

When Can a Seller Back Out After Accepting an Offer?

As alluded to throughout this article, it can be very difficult — if not impossible — for a seller to back out of an accepted offer. If a seller tries to back out of a real estate contract they will often face some sort of legal battle with the buyer. There are, however, some ways that allow for a seller to back out of the agreement.

New Home Contingency

Most people involved in a purchase agreement will know about the buyer’s contingencies — more on that shortly — but a seller can include one that will allow them to cancel the agreement if they are unable to find a new home. 

Advice from an Attorney Review

In most cases, after accepting an offer and signing the purchase agreement an attorney review will take place. During an attorney review of the contract, the seller’s attorney may advise them to back out of the deal for a reason they see fit after reviewing the contract. Sellers can cancel the deal during this review period if their attorneys suggest it, but it is typically only a few days in length. 

Buyer’s Contingencies

Although buyer contingencies are usually there to protect the buyer, once they are invoked the seller can also walk away from the deal. Buyer contingencies can include a variety of different things and are built into the contract from the start. Let’s take a look at some of the more common contingencies included in a contract to protect the buyer.

  • Appraisal Contingency — This was briefly mentioned earlier in the article, and it has to do with the appraisal of the real estate they are buying. If the property’s bank-ordered appraisal returns a value lower than the agreed-upon price in the contract, the buyer can walk away if issues arise in negotiations. 
  • Home Inspection Contingency — Buyers might be unhappy with the condition of the home after it has been inspected, they can back out of the deal. On that same note, if a seller wants to back out, they can refuse to pay for the repairs or offer a credit for the issues, which may very likely lead to the buyer walking away and the seller getting what they wanted.
  • Financing Contingency — If the buyer cannot get approved for the financing they need for whatever reason, they can walk away from the deal, and the seller’s obligations to sell are also eliminated.

Consequences of the Seller Backing Out 

If the seller is dead set on backing out of the deal and decides to cancel the contract without the legal right to do so, they will likely face several consequences depending on how the buyer wishes to proceed. 

Paying the Buyer Damages

The most common repercussion facing a seller who backs out of a contract is to pay the buyer if they are sued for damages. A buyer can sue for whatever damages are caused by the seller backing out, including housing fees, deposits, inspection costs, application costs, legal fees, and more. 

Having to Complete the Deal

Since the seller is canceling the real estate contract illegally, the buyer can force the seller to go through with the contract and close on the deal as outlined in the agreement. This is referred to as specific performance, and the courts force the seller to close. Due to the added costs, hassle, and time, buyers typically will not go this route, but it is usually the worst case scenario for the seller.

Compensating the Real Estate Agent

Once the contract has been signed, not only are the buyer and seller legally involved; the listing agent can also sue the seller for breach of the listing agreement. Since most of the time the agent does not receive any compensation until the property is sold, they can have a lot of time invested — and therefore wasted — if the seller backs out of a deal. If that happens, the seller may be forced to pay the agent for their time and effort, sometimes even the full commission amount as if the deal went through as expected. 

How to Back Out of a Real Estate Contract as the Seller

Although it may be very difficult for the seller to back out of a real estate contract, it isn’t impossible. If you’re selling your home and want to back out of the agreement, keep these tips in mind and you may just find a way out that best fits your situation.

Making an Agreement With the Buyer

Since the buyer typically holds all the power once the contract is signed, getting the buyer to agree to walk away will allow the seller to get out of the deal as well. If the buyer understands where the seller is coming from and agrees to walk away from the deal, both parties are free of the contract.

Pay the Buyer Damages Without Court

Rather than going to court and dragging the battle out with all that time and money added, the seller can talk to the buyer and pay them damages without going to court to get out of the deal. In most cases, the buyer will not only need a refund of what they’ve paid in fees and upfront costs so far, but they will also require a cash incentive to walk away from the deal to make up for their time and effort.

Talk to Your Attorney

As you are now well aware, real estate contracts are legally binding agreements. With that in mind, talking to your attorney as the seller will likely be the best place to start if the buyer doesn’t agree to simply abandon the deal. Your attorney will likely know the best way to handle the situation and can help figure out the most convenient way to get out of the contract.

Backing Out of a Real Estate Contract as a Seller

As you now know, it may be possible for a seller to back out of a real estate contract, but it’s not easy. Sometimes, it’s impossible to break the contract and back out of the deal. With that in mind, it’s typically best for the seller to carefully go over all their options and be ready to move forward before signing that agreement. 

Once the contract is signed it is certainly much more difficult for the seller to back out, but sometimes they need to for a variety of reasons. Life happens, and the buyer will likely understand that, so the best course of action is usually to start by talking