I accepted an offer on my house. I want out. So, can I back out of an accepted offer?
You perfectly manicured your lawn, and staged your house for flawless photos. Then, you vacated your space for hours to allow random people to walk around and judge your private sanctuary. You received a few offers, picked the best one, signed the contract and are set to sell your home. Champagne bottles pop and you start packing!
Suddenly you realize you don’t want to sell your home anymore.
Maybe your neighbors with the yappy dog finally moved out. Maybe your new purchase fell through. Perhaps your financial situation has changed. Or, you’ve simply realized that you’re really going to miss that oversized garage. Either way, you want to get out of selling your home and are wondering what your options are. Can you actually get out? The short answer is – it’s complicated. Each state has different approaches as to whether, and/or when you can get out of a contract to sell your home. A homeowner may be able to back out of an accepted offer in certain circumstances, but not in others. As a rule of thumb, sellers are generally bound by their contract as soon as its signed.
In any instance, if you’re contemplating backing out on your contract you must work closely with your agent and a qualified attorney. It’s essential to fully understand if you have options and what the ramifications of pursuing those options may be. As well as other additional considerations.
It’s important to remember whether you’re buying or selling, you should always consult with a local expert and/or legal counsel. This is especially important before taking any actions regarding a home sale contract.
That being said, here are a few common questions asked by sellers about getting out of a home sale contract:
The buyer’s inspection was bad – can the seller get out of an accepted offer on the house?
When home buyers receive their inspection report, they will sometimes request that sellers make repairs based on the report. Or request a credit to help cover the costs for the repairs that are needed. In this scenario, sellers can decide whether they’d like to make all or some of the repairs. Or the seller could decide they don’t want to make any repairs. The decision not to complete some or all requested repairs can cause a buyer to decide to cancel the contract. This is typically because they don’t want to inherit the issues upon buying the home. In fact, inspection results and an inability to reach an agreement on what repairs the seller will complete is one of the most common, if not the single most common reason a home falls out of contract in a competitive market.
The buyer’s appraisal came in lower than the purchase price, does that mean that the sale is canceled?
Much like the inspection report, appraisals are done for the benefit of the lender and the buyer, not the seller. However a buyer’s low appraisal sometimes may still cause a seller to worry about their own bottom line and whether they will have to reduce the home’s price. It’s important to remember that a low appraisal doesn’t always result in the seller making less on the sale. Sometimes buyers elect to cover the entire Appraisal Gap (the difference between the appraisal and contract price) with cash – the buyer still get the house, and the seller still gets the full benefit of the bargain – it’s a win-win scenario!
It’s also good to remember that when appraisals come back low, sellers are usually not obligated to come down to the appraised price, unless they’ve already agreed to it, or are willing to move forward at a lower price to make sure the sale closes. Oftentimes, the buyer and seller re-engage in negotiations and meet somewhere in the middle of the Contract Price and the Appraisal Price.
The house appraised for more than the contract amount – can the seller get out or raise the sales price?
While it would certainly be nice for the seller to get out of the accepted offer on the house and re-list their home for a higher price, this is an unlikely way to get out of a contract. Most often the buyer won’t share the appraisal with the seller, especially if it appraises above value. It’s like showing your hand mid poker round – generally inadvisable! And even if the buyer shares their appraisal, it very rarely results in a clear contractual out. Legal counsel may be able to help the seller determine if they have any options to get out.
Alternatively, while a buyer will often delay an appraisal until after the inspection period has closed, that’s not always the case. In instances where inspection repair or credits are still in discussion at the time of the appraisal, it may help guide the sellers’ decisions regarding what repairs they agree to in order to move forward based on the above contract price appraisal.
It’s closing day – can the seller back out of an accepted offer on a house?
Once the buyer and seller have made it this far, it’s pretty difficult to get out of the contract. This is usually a good thing – both parties have already put so much into the deal and are depending on the sale happening. Now, that doesn’t always mean there is no for a seller to back out of an accepted offer on the house. There is a chance the buyer doesn’t end up performing, or their lender falls through, or the seller can negotiate out of it – crazier things have happened. However, in absence of a viable route to get out of the contract, both parties risk defaulting under the contract and possible legal action by the other party if they don’t move forward with the sale.
In this instance, as in almost any big decision in buying and selling a home, the seller needs to reach out to a local qualified expert to see what their options are. A seasoned real estate attorney should be able to help the seller determine if they have any options, the risks and benefits of those options, and ultimately their next best steps.
What is defaulting on a real estate contract? How much does defaulting matter?
Broadly speaking, a default occurs when a party doesn’t meet their contractual obligations. These can range in size, the breach may be minor (aka “partial”) or material, and often the penalties or outcomes are tied to the severity of the breach. While breaches no longer face draconian punishments like beheading for breaking an agreement (we’re looking at you Athenians!), the penalties for backing out of a home sale contract can still be severe. While the remedy varies state-to-state it’s not uncommon for a breaching seller to face steep financial penalties or be forced to complete the sale. It is important that the seller understands all of the potential consequences of a breach before deciding to break a term of their agreement, and a seasoned agent can help the seller recognize where breaches can occur, and help the seller avoid unintentional breaches.
Can a Seller Back Out of an Accepted Offer on a House: The Bottom Line
So, can a seller really back out of an accepted offer on a house? In some cases, maybe. But it’s safe to say backing out of an accepted offer is likely no one’s first choice.
In any real estate transaction, it’s essential to read the sale contract and any contingencies very carefully. Ensure you understand all of the terms and conditions involved in the sale before moving forward. An expert real estate agent can make reviewing the documents much less stressful, and provide guidance throughout the transaction. This way, you can hopefully avoid having to learn how to back out of an accepted offer on a house. But, if you do find yourself in a complicated situation during your real estate transaction, please reach out to a lawyer.