When sellers back out of a sale, buyers may be entitled to compensation for their losses. A contract to sell real estate is legally binding on buyers and sellers. Once the agreement is signed and funds are deposited in escrow, neither party can back out without consequences.
Why Sellers Back Out
On occasion sellers have a change of heart and seek to cancel a real estate sales contract. Generally, backing out of a contract is only legal if the buyer has not fulfilled the terms of the agreement, fails to provide the required funds, or requests provisions not included in the contract.
Sometimes there are other reasons sellers back out of contracts. They may have received a higher offer from another buyer after signing. Unforeseen circumstances such as illness, death or job loss can cause a seller to reconsider. In some cases, they may be unable to find another suitable house or just get cold feet about leaving their longtime home.
Buyers Left Scrambling
When sellers do back out, buyers can be left scrambling to recover their losses and find a place to live. As long as buyers have not breached the sales contract, they may be entitled to recover compensation for their damages, including the cost of:
- Temporary Housing – Buyers often have sold or are selling their home to buy a new one. The seller may be responsible for paying the costs of their temporary housing.
- Buyer’s Fees – Home inspections, surveys and other standard fees paid by the buyer are generally non-refundable
- Storage – Left without a place to live, buyers may be forced to pay for storage for their possessions until they find another home
- Legal Costs – If the seller refuses to compensate them for their losses, buyers may be forced to go to court to obtain a settlement which may include the legal fees and court expenses
- Damages – Courts may award compensatory damages for the lost time and inconvenience the buyer incurs
A contract protects the rights of all parties to an agreement. In a real estate transaction, buyers should be aware that their rights are equally protected. Sellers have an obligation to fulfill the terms of the sales contract. If they fail to do so, they may be required to compensate buyers for their losses.