It is not uncommon for sellers to get cold feet during the last stages of a home sale transaction. This can happen for a number of reasons, including seller’s remorse, low appraisal, lifestyle change and lack of an adequate replacement home. Whatever reason has you thinking about canceling your real estate transaction, it is important that you understand when you can legally back out of the contract — and what the consequences are if you rescind on the agreement too late.
According to Zillow, there are seven ways you can back out of a real estate contract with little to no repercussions. If the contract is unsigned, exists only verbally or if it contains a new home contingency, you may be able to cancel the agreement with little to no fallout. If you make a motion to cancel during the attorney review period, you may find success with little consequence. You may also capitalize on buyer contingencies, such as the home inspection exigency, appraisal contingency or financing contingency.
In some instances, the buyer may agree to cancel the contract. This may occur because he or she sympathizes with you or because you disclose more negatives than necessary.
If you do not have a legal loophole to use, or if the buyer does not agree to cancel the contract, you face legal and financial consequences from both the buyer and realtor. The most common course of action is for the buyer to sue for specific performance. If the buyer is successful, the judge may order you to follow through with the terms of the contract, which is to sell your home.
If the buyer chooses not to go the specific performance route, he or she may still sue for damages. Damages, in this case, may include storage costs, costs of temporary housing, survey fees, inspection fees, HOA application fees, lost deposit and legal fees.
The buyer is not the only party that loses money when you cancel a real estate deal unexpectedly. The listing agent expended a significant amount of resources marketing your home, including time and money spent on staging, photography, advertising and showing your home to prospects. If you cancel a pending agreement, the listing agent loses out on the commission, which a judge may order you to pay.