Buying a home involves a complex transaction. Virginia homebuyers with a signed purchase contract may find that the seller wants to back out, especially in a hot real estate market.
Once both parties have signed the contract, legally, they must follow through with the transaction. However, there are some circumstances in which the contract could be canceled.
Contingencies in the contract
Most real estate contracts contain certain contingencies to protect both the buyer and the seller, such as a buyer who cannot obtain financing. If a buyer does not hold up their end of the terms contained in the sale contract, the seller may have a valid case to cancel the transaction. Buyer non-performance examples include missing a closing deadline or not providing a required deposit.
Seller breach of contract
If a seller attempts to back out of a contract and their reason does not fall under any contingencies or other valid reasons, they could be in breach of the contract. This situation can trigger legal action and financial penalties for the seller.
Common reasons that sellers breach contracts include:
- Getting a higher offer from someone else
- Being unable to find a suitable replacement home
- Experiencing an unexpected life event that creates a financial hardship
- Receiving an appraisal for a higher price than the buyer is offering
In breach of contract issues, the buyer may have some recourse if a seller does not follow through on the deal. Real estate contracts can include a clause for liquidated damages or the amount the seller must pay if they back out. This amount can include compensation for expenses or losses that the buyer incurred related to the transaction. The buyer may be entitled to specific performance, meaning the seller must legally honor the contract regardless of their circumstances.
In some cases, buyers and sellers can mutually agree to cancel a contract without legal or financial penalties. Circumstances could have changed significantly, making the deal a poor choice for both sides.