Homeowners

Your Rights as a Home Seller: When You Can Walk Away and When It’ll Cost You

Call it seller’s remorse: You accepted an offer on your home, but now you’re having second thoughts. 

Maybe a higher offer came in, concerns about the buyer surfaced, or your circumstances changed and moving no longer makes sense. 

Whatever the reason, it’s not uncommon for home sellers to want, or need, to walk away from a deal. However, there can be financial penalties and other consequences.

“The reality is that life gets in the way,” said Adorna Carroll. She is a real estate broker based in Newington, Conn., and leads Dynamic Directions, which offers educational training for real estate professionals. “There are several valid reasons that the seller may choose not to close.” 

While backing out of a home sale is possible, it can also lead to significant repercussions, from lost time and money to potential legal action.

Here’s what home sellers should consider as part of their exit strategy. 

When home sellers can back out of a deal without penalties

Depending on the stage of the transaction, you may be able to walk away more easily. Common scenarios include: 

• Before the contract is signed: An accepted offer and a fully executed purchase agreement are not the same thing. Home sellers (and homebuyers) are typically free to move on without incurring penalties before the contract is signed and legally binding. 
• During attorney review: In some states, home sale contracts are subject to an attorney review period. During this window, either party may be able to cancel or request changes to the agreement. Rules vary by state, so sellers should consult their real estate attorney or real estate agent for specifics. 
• The buyer misses deadlines or violates the contract: Real estate contracts typically include deadlines for key milestones, such as homebuyers securing financing from a lender. If a buyer fails to meet those obligations or otherwise breaches the agreement, the seller may have grounds to terminate the contract. 
• Both parties agree to walk away: Sometimes neither the home sellers nor the buyers want to go ahead with the sale. In those cases, buyers and sellers can often mutually agree to cancel the deal.
• Repairs become a sticking point: Home inspections frequently lead to negotiations over repairs. If the contract allows for inspection-related contingencies and the parties can’t reach an agreement on how to address issues uncovered during the inspection, the seller and buyer may be able to remove themselves from the agreement and exit the deal.

When backing out of a home sale could lead to penalties for sellers

Once a purchase agreement to buy a home is fully executed, sellers may be considered in breach of contract if they refuse to move forward with the deal. 

That doesn’t mean that you can’t refuse to close, but that sellers should be prepared to accept the financial responsibility of doing so, said Carroll.

“Every contract is a promise to close, not a guarantee,” she said. 

Depending on state law and contract terms, a seller could be required to reimburse the buyer for certain expenses incurred during the transaction, such as earnest money, inspection costs, or appraisal fees. 

In some situations, buyers may even pursue legal action. A court could award monetary damages, or, in rare cases, order the seller to complete the sale through a legal remedy known as “specific performance.” 

While many disputes are resolved before reaching that point, the possibility of litigation can create significant stress, delays, and expenses for both parties. 

The hidden cost of home sellers holding out for a better offer

It’s not uncommon to experience second thoughts after accepting an offer, especially in a competitive market where bidding wars are common. But real estate markets can shift quickly, and potential future buyers (and higher offers) are not guaranteed. 

Walking away from a qualified buyer could also mean restarting showings, renegotiating with future buyers, or staying on the market longer than expected. A property that lingers could even raise red flags for prospective buyers, potentially leading to lower offers down the road.

“Usually, the first offers that come in on a property within days or the week of listing the property should be taken very seriously,” said Carroll. “Waiting for higher prices usually [leads] to seller disappointment.” 

Home sellers should seek advice from the pros before exiting a deal

If you’re considering walking away from a deal, seeking professional guidance from a real estate attorney or experienced agent can help you make an informed decision…and avoid costly mistakes.

Once you have committed to exiting, clear and prompt communication between your team and the buyer’s side can make the process easier for everyone involved.

“There’s a certain order,” Carroll said. “You don’t want to drag this on.”