Can a Seller Back Out of an Accepted Offer on a House?

By 

Josiah Wilmoth

Updated 

October 22nd, 2020

SHARE

It's sometimes possible for a seller to back out of an accepted offer on a house. However, it's not very common — and tricky to do correctly.

There are only a few situations that allow sellers to back out legally. And backing out the wrong way could have serious legal consequences.

We recommend consulting with your real estate agent and/or a qualified real estate attorney before trying to get out of a home sale.

» MORE: Find a realtor near you.

In this article, we'll explain the legal ways to get out of an accepted offer, which tactics you should avoid, and what to do if you have seller's remorse after signing a purchase agreement.

How sellers can get out of an accepted offer on a house

In general, home sellers have three ways to get out of a signed real estate contract:

  • Taking advantage of a legal provision in the contract
  • Proving the buyer committed fraud
  • Persuading the buyer to agree to cancel the contract

In other words, the seller can’t simply tell the buyer they’ve changed their mind and walk away.

Sellers should only attempt to cancel a purchase agreement if:

  • It's absolutely necessary.
  • They have a sound legal avenue to escape the sale.

Using the wrong tactics to get out of a sale — or cutting corners when attempting to use valid ones — could quickly land sellers in a legal minefield.

Valid reasons sellers can terminate real estate contracts

Assuming the buyer holds up their end of the bargain, it’s very difficult for sellers to back out of a purchase agreement.

That said, there are three possible scenarios that allow a seller to terminate a contract, even when the buyer wants to follow through with the sale:

Seller backs out of the contract using a contingency

The most straightforward way for sellers to back out of a signed contract is to exercise a “contingency” — a clause in the agreement that allows one or both parties to walk away under certain conditions.

The hitch is that sellers often don’t have this option. Most contingencies in purchase agreements protect buyers. For example, an offer might be contingent upon the findings of a home inspection or their ability to secure financing.

While seller contingencies are somewhat rare, they do exist — particularly in highly competitive markets.

Here are the three most common contingencies sellers can use to legally terminate a signed contract:

Attorney review period
  • Short window (usually 3-5 days) in which attorneys can review a contract before it becomes binding
  • Either party can request modifications or void the agreement if they so choose
  • Mandatory for all real estate contracts in New Jersey — must be stipulated in advance in other states
Home of choice
  • Stipulates a period of time in which the seller can terminate the contract if they fail to find a satisfactory place to live
Bump (or kick out) clause
  • If seller accepts an offer with contingencies, they can continue to market the home
  • Should they receive a better offer, they have the option to “bump” the original offer if that buyer fails to remove their contingencies

Need an expert negotiator on your side?

Match with top local agents for free — save thousands on commission.

Buyer breaches the contract

Though uncommon, the seller may be able to back out of the sale if the buyer violates specific terms of the agreement. This is called making a "breach of contract."

Examples of buyer violations that may authorize the seller to terminate the contract include:

  • Missing the deadline to make their escrow deposit
  • Not informing the lender and/or seller of changes to their financial situation that could prevent them from securing their loan

State law and the contract itself dictate when and how a seller can terminate a purchase agreement based on a buyer's breach of contract.

Typically, the seller must give formal notice to the buyer that they’re in breach and then wait several days to see if they comply.

California, for example, requires sellers looking to use a contract violation as a way to back out of escrow to:

  • Deliver a "Notice to Buyer to Perform"
  • Give buyer 2 days to comply with the contract

Long story short, sellers can’t back out if the buyer misses a deadline by a few minutes. They must be able to prove the buyer is willfully violating the contract, which requires time to go through the proper legal channels.

Buyer defrauds seller

In extremely rare cases, a court may void a real estate contract if the seller can prove the buyer defrauded them.

Just like it's illegal for sellers to lie about the condition of a house, buyers may not use fraudulent practices to trick someone into signing a purchase agreement.

For example:

Hustlers masquerading as real estate investors have been known to prey on elderly homeowners and trick them into selling their houses for a fraction of their fair market value.

If you think you or a loved one may be a victim of fraud, consult with a real estate attorney before attempting to terminate a contract.

How sellers can persuade buyers to cancel a purchase agreement

Without a valid reason to terminate a contract, the seller can only get out of the sale legally if the buyer releases them.

There are two ways this typically happens:

Note that the seller can't force the buyer into either of these options. However, the seller may be able to use specific tactics to encourage the buyer to walk away from the purchase.

Convince the buyer to exercise one of their contingencies

If the buyer threatens to exercise one of their contingencies, the seller can play hardball to encourage them to walk away from the sale.

This is most likely to happen if:

  • The buyer's home inspection reveals problems.
  • The home appraises for less than the agreed upon sale price.

Getting the buyer to walk away after an inspection

The seller may be able to convince the buyer to walk away by refusing to renegotiate following a home inspection.

More than half of all real estate contracts include an inspection contingency, and 86% of inspections uncover at least one problem that needs to be repaired.

Buyers commonly attempt to use the home inspector's findings to renegotiate their purchase agreements. They typically ask the seller to reduce the sale price or make repairs.

Sellers are under no obligation to make concessions, and if they refuse to alter the original contract, the buyer may back out.

However, if the inspection reveals the home is in good shape — or the buyer is highly motivated to purchase the home — they might proceed with the sale anyway.

Refuse to modify the contract after a low appraisal

The seller may also be able to get the buyer to terminate the purchase agreement by refusing to modify the contract if the home appraises below the sale price.

This scenario could happen if the buyer's offer is contingent on securing a mortgage. Lenders usually won't approve a mortgage amount for more than the home is worth.

However, this scenario is rare. According to Federal Reserve research, fewer than 10% of appraisals come in below the purchase price.

Persuade the buyer to cancel the contract

In the absence of any clear legal avenues to back out of the deal, the seller’s only option may be trying to persuade the buyer to cancel the contract.

This probably won’t be easy. At this point, the buyer has likely developed an emotional attachment to the home. Moreover, if they’ve already sold their current home, nixing the deal could leave them in need of temporary housing.

The most effective strategy to overcome those hurdles is one most sellers probably won’t like:

Offer the buyer cash. A lot of cash.

The seller holds virtually zero leverage in this situation. It’s hard to imagine any buyer would simply walk away without a significant incentive to do so.

The seller can also try to make an emotional appeal to the buyer. Sometimes, when sellers present a genuinely compelling reason they want to back out of the sale — e.g., new job fell through, death in the family, divorce, etc. — a more empathetic buyer might agree to release them from the contract.

However, if the seller is trying to back out because they think they can get a better offer, that’s probably not going to do the trick.

Tactics sellers shouldn't use to back out of an accepted offer

In the absence of a clear legal way to get out of the contract, sellers may be tempted to get "creative" — or just give into their frustrations and refuse to abide by the contract.

We DO NOT recommend doing this.

Two of the most commonly employed — but ill-advised — tactics sellers resort to are:

Over-disclosing problems to scare buyers away

The first ill-advised tactic remorseful sellers resort to is trying to scare the buyer away by over-disclosing problems with the home.

In this situation, the seller will go above and beyond their state's disclosure requirements to disclose every conceivable issue — then frame each problem in the ugliest light possible.

Breaching the contract or walking away improperly

It's even more dangerous for a seller to willfully violate the contract to provoke the buyer into terminating it — or, if that tactic fails, to refuse to comply with it altogether.

Trying to cancel a contract without a legal justification isn't the only action that could constitute a serious breach of contract. Avoid the temptation to do things that deliberately impede the buyer’s ability to complete the purchase, including:

  • Denying the buyer access to the property for inspections
  • Failing to complete repairs you agreed to make
  • Damaging the home on purpose
  • Refusing to deliver a clean title

What could happen if the seller improperly terminates a contract?

If the seller breaches a contract or backs out improperly, they could face serious consequences:

The buyer may sue the seller

If the seller breaches the contract, the buyer may sue for monetary damages or to force them to complete the home sale.

Monetary damages lawsuit

The buyer will most likely sue the seller for monetary damages. If the buyer wins, the seller could owe them compensation for expenses they incurred during the sale process and as a result of the breached contract.

State laws determine what specific costs the buyer can recover. They're generally eligible for compensation for expenses like:

  • Temporary housing costs
  • Due diligence expenses
  • Court fees

However, in some places, the buyer may be able to sue for additional compensation, especially if it's clear the seller acted in bad faith.

Specific performance lawsuit

If a seller gets cold feet and tries to back out, a buyer may sue them for "specific performance." If the seller loses this lawsuit, the court will force them to comply with the contract and sell the house.

Specific performance lawsuits are less common than monetary damages suits because most buyers don't want to halt their relocation plans indefinitely while their case is in court.

The agent may sue the seller

If the buyer has grounds for a lawsuit, it's likely that the seller’s real estate agent does too. The agent’s broker may take the seller to court to compel them to pay the commission they would’ve collected on the sale, had it gone through.

That's right:

The seller may have to pay realtor commission even if they don't actually sell the home.

Listing agreements — the contract sellers signed with their agent's brokerage — typically stipulate that sellers owe realtor commission if the property attracts a "willing and able" buyer.

So, as long as the buyer fulfilled their contractual obligations up until the seller breached the purchase agreement, a court could order the seller to pay whatever commission they agreed to — usually 5-6% of the sale price they negotiated with the buyer.

The buyer could file a legal claim against the seller’s title

If the buyer sues the seller, they'll likely file a legal notice called a "lis pendens" on the property to publicize that the home's title is subject to ongoing litigation.

It's difficult to sell a home with a lis pendens, especially for market value. The new owner would become liable for the result of the lawsuit, and few buyers want to assume that risk. And if the prospective buyer needs financing, they'll probably be unable to secure loan approval until the lis pendens is removed.

What to do if you're considering backing out of selling your house

Unless you have a contingency that authorizes you to terminate the purchase agreement, it's probably not worth the effort or risk to back out of one contract to chase a better offer.

There may be situations where it makes sense to call off a sale, such as an unexpected job loss or a death in the family. However, even then, you could still face serious consequences if you back out of the contract the wrong way.

If you're considering trying to get out of a real estate contract, we recommend that you:

  • Take a step back and assess your motives honestly.
  • Evaluate your options to get out of the sale.
  • Decide whether it's worth the potential financial and legal consequences.
  • Consult with your realtor and a real estate attorney before doing anything you might regret later.

Few home sellers make it through a sale without having second thoughts at some point during the process.

But remember:

Seller's remorse is usually temporary and easy to shake. Lawsuits…not so much.

Top FAQs about backing out of an accepted offer on a house

Can a seller back out of escrow if the appraisal is too high or too low?

No, the seller can't back out of escrow based on the results of an appraisal.

If the appraisal is higher than the sale price, the seller can't nix the contract to pursue a better offer — unless they have another valid reason.

The seller can't call off the sale because the appraisal is lower than the purchase price either. However, a low appraisal could hurt the buyer's ability to get a mortgage, which may cause the sale to fall apart anyway.

Can a seller back out of a contract during the due diligence or option period?

Probably not. "Option" and "due diligence" periods give buyers broad discretion to void purchase agreements based on the results of an inspection (or, in states like North Carolina and Texas, for any reason at all).

The seller doesn't need this protection because, as the owner of the property, they don't have any due diligence to perform.

If a seller wants to back out during the option period, they'll need another valid reason, such as the buyer failing to pay their option fee by the deadline listed in the contract.

Can a seller back out after an inspection?

Short answer: no, the seller can't back out after an inspection. However, the seller may be able to get the buyer to walk away from the transaction based on a negative inspection report.

If the inspection uncovers serious problems and the seller refuses to renegotiate, a buyer with an inspection contingency may exercise that "escape clause" to terminate the purchase agreement.

But the seller must proceed with the sale if the buyer removes their inspection contingency anyway.

Can a seller back out of a contingent offer?

A seller can only back out of a contingent offer if the purchase agreement includes a contingency that authorizes the seller to terminate the contract.

Can a seller still show a house that's under contract?

Yes, a seller can show and even receive backup offers on a home that's under contract. However, they can't accept any of those offers unless the first contract falls through.

Can a seller accept another offer after going under contract?

Not usually. Real estate contracts are legally binding, so sellers can't back out just because they received a better offer.

The main exception is when the contract includes a contingency that allows the seller to terminate the sale. One example would be a bump clause, which authorizes the seller to accept a better offer if the first buyer won't remove their contingencies.