Legal Way a Seller Can Back Out of Selling a House

Sometimes the seller regrets his decision to sell after signing the contract.

When you accept a buyer’s purchase offer for your house, you enter into a binding contract with the buyer. Typically, the transaction begins an escrow process, which ends after the buyer pays you for the property and the title conveys to the buyer. If you change your mind during the escrow, and refuse to cooperate with the transaction, the buyer can sue you for a breach of contract. The court can then compel you to complete the sale, pay the buyer damages or both. If you wish to cancel the contract without facing retribution from the buyer, you have several options.

Equitable Title Claim

When you sign a purchase contract and accept a buyer’s offer, that buyer then has an equitable title claim in the property. This does not mean the buyer owns the property, yet it gives him the right to absolute ownership after the completion of the contract. Therefore, breaking the contract without the buyer’s cooperation does not eliminate the equitable title claim. This can cloud the title of your property, making it difficult for you to convey clear title to another party in the future.

Review the Contract

Read the purchase contract you signed with the buyer. Purchase contracts and real estate laws vary by state. Consult with a real estate attorney to discover if there is a legal way to back out of the contract. You may discover the buyer has failed to meet a term of the contract, which now gives you the right to cancel the transaction. For example, the buyer may have failed to provide you with credit information within a timeframe specified within the contract. Depending on the contact and real estate laws, this may provide a way out of the agreement.

Ask Nicely

Ask the buyer to allow you to back out of the agreement. Be prepared to offer the buyer a cash settlement, which should cover all of his expenses involving the transaction. The buyer may have already paid for an inspection, appraisal and loan fees. The buyer will be more receptive if you give him a cash incentive.

Plead Incompetency

Prove you were forced or not mentally competent when you signed the purchase agreement. In order for a contract to be valid, it must be voluntary and made by legally competent parties. If you can prove someone held a gun to your head and forced you to sign the purchase agreement or you were incompetent when you agreed, then the contract is invalid. The only legal way for this to work is if you really were forced or were mentally incompetent when you signed the offer.

References

• "Modern Real Estate Practice"; Galaty, Allaway and Kyle; 2006