The short answer is yes. A home seller can back out of a home sale for several reasons, but fortunately, it’s very uncommon.. Seller’s are usually highly motivated to make the real estate transaction happen for their own personal gain which is why when they do change their mind, it leaves buyers confused and upset.

When buyers back out of a transaction, they often are financially liable due to the amount of earnest money they put down. Earnest money deposits show that a buyer is serious by putting some skin in the game, which can be a significant amount of money (about 1-2% of the home purchase price)

While home sellers don’t have to offer any sort of indication that they are serious via earnest money, that doesn’t mean that there aren’t any ramifications for backing out of a real estate contract. Below are when home sellers can and cannot back out of a home sale and also why they would consider doing such a thing.

Why would a seller decide not to sell their home?

It’s very uncommon for home sellers to list their home on the market and then back out of the sale. Their new home purchase might have fallen through or overall life circumstances might have changed.

Appraisal came back low

One of the main reasons sellers might want to back out of the sale is that the appraisal came back too low for the buyer. When it’s a seller’s market, house prices are climbing and often there are multiple buyers that want a property.

Sellers however forget that what buyers offer is not always what the bank will approve because a bank will not loan more money than a home is worth. When appraisals come back low in this situation, sellers don’t have that many options, especially when the buyer doesn’t have the ability to make up the difference in cash.

The seller can’t find their next house

If the seller is in the process of looking for their next home while their current home is on the market, they might find themselves in a situation where a suitable property is not available.

This happens in sellers markets because it’s harder to be a buyer and people often get out bidded. A catch-22 at it’s finest, the seller is faced with the ease of finding buyers for their property, but when they do become buyers themselves, it’s difficult for them to secure their next place to live.

In order for a seller to back out of this situation, their real estate agent would have needed to make the sales contract contingent on the seller finding their next home. 

Life circumstances change

Sellers also back out because of unexpected life circumstances. Maybe it’s a loss of a job or death in the family that makes it more financially difficult for them to move. Additionally, maybe the reason for moving disappeared such as a job opportunity in another state being revoked. While most buyers will understand, they will at the very least want to be refunded the cost of the appraisal and home inspections.

When can a seller back out of a sale?

There are a few scenarios where a seller can back out of sale without any ramifications:

The contract has yet to be signed – If the contract hasn’t been officially signed, a seller can back out of the deal at any time without any issues.

The contract is in review period: Most home sales use a standard real estate contract or purchase agreement, which provides a five day review provision. During the five day window, the seller or buyer can cancel the contract for any reason which allows for either party to back out without any consequences.

Seller added an addendum: The listing agent of the seller could have added an addendum to the contract that says they can back out without any penalties. For example, there might be a contingency that the seller first has to find a new place to live before the home can be sold.

Breach of contract by the buyer: Sometimes a buyer might breach a contract in which the seller is allowed to walk away from the deal. One common issue that buyers face is failing to secure a mortgage in a certain time frame. If the seller doesn’t want to wait for the buyer to find another source of financing, then they are allowed to walk away from the deal.

Buyer makes repair requests that the seller doesn’t want to do: When home buyers receive their inspection report, they will sometimes request that sellers make repairs based on the report or issue a credit to help cover the costs. In this scenario, sellers can decide that they don’t want to make the repairs which could effectively cancel the contract. This indirectly could cause the contract to cancel because the buyer would naturally want to walk away from inheriting issues upon buying the home.

When can’t a seller back out of the sale?

Once a real estate transaction has an executed purchase agreement between buyer and seller, it can be difficult for a seller to back out of the contract and there could be serious consequences. In real estate law, there’s something called a specific performance provision that allows buyers to hold a seller’s feet to the fire and uphold their side of the legally binding contract. Essentially, a buyer can take a seller to court if they don’t.

The issue with this is that it often takes more time and money than it’s worth to take the seller to court and most buyers would probably just allow the seller to change their mind. 

However, if the buyer has a significant loss such as buying temporary housing, already moving,  storage units, inspections, surveys, appraisals, etc. then it might make sense for the buyer to sue the seller to recoup the money.

The easiest thing for a seller to do that wants to back out of the sale is to simply pay the home buyer back to help recoup the money that they lost due to the situation.