Once you have an accepted purchase offer as a seller, are you obligated to follow through with the sale or can you decide to back out?
Can A Seller Back Out Of An Accepted Offer?
Yes, a seller can back out of an accepted offer in certain situations such as during the attorney review period, with financing or appraisal contingencies, inspection issues, significant closing delays, or breach of contract. However, this could result in loss of the buyer’s earnest money deposit and possible legal action.
Scenarios Where A Seller Can Back Out With Consequences
Let’s walk through when a seller might be able to reverse course after accepting an offer and what would happen:
1. Attorney Review Period
During the Attorney Review period, where the attorney has a right to disapprove of certain terms of the contract, the seller can back out. However, this should not be purely based on the purchase price.
2. Financing or Appraisal Contingency
Most real estate contracts have financing and appraisal contingencies protecting the buyer. If the buyer is unable to secure a loan or the home doesn’t appraise for the purchase price, these contingencies allow them to cancel. The seller must then return the buyer’s earnest money deposit.
3. Inspection Contingency
The buyer typically has the right to cancel if the inspection reveals expensive repairs not previously disclosed by the seller. The seller may then decide to let the buyer walk rather than make repairs. Earnest money is returned to the buyer in this scenario.
4. Delayed Closing
If the closing date is delayed significantly – for example, over a month – due to buyer delays, the seller can potentially terminate after giving notice. State laws vary on acceptable cancellation reasons.
5. Breach of Contract
If one party materially breaches the terms of the executed purchase and sales agreement, the other party may have grounds to exit the deal and potentially pursue legal action. Examples could include:
- The buyer fails to provide truthful documentation of their financial assets to secure financing.
- The seller refuses to transfer the title and deed to the buyer after closing.
- The buyer does not deliver the down payment funds by the contractual deadline.
- The seller misrepresents a known material defect with the home.
As you can see, there are specific circumstances where a seller can back out after initially accepting an offer. But the seller risks forfeiting the buyer’s earnest money deposit and faces potential legal action if cancellation is unwarranted. Consult your real estate attorney before terminating an executed sales contract.
A seller should not accept an offer and then arbitrarily change their mind. There must be reasonable grounds like those above to break the legal sales agreement.
Proceed cautiously and with your real estate attorney’s guidance if you’re considering going back on an accepted offer.Learn more about What a real estate attorney does in a house closing.