When an offer is made on a home and accepted, the deal isn’t done. In fact, there is a lot of work that has to take place before you sign the grant deed to your property over to the buyer and your home becomes their home. This process can often take weeks or even months to complete. This means that there is a chance that you, the seller, may face a change in your circumstances that makes you want to back out of selling your home.
In some cases, a family emergency, unforeseen circumstances, or something else out of your control may cause you to need to get out of the deal. However, there are also cases where a seller simply changes his or her mind about wanting to sell their home. Perhaps you’ve spoken with your accountant, tax professional, or even your family, and decided that it’s simply not the right time to sell your home. If you’ve already signed the purchase agreement, do you have anyway out of the deal?
Overall, this is a legal question, and I am not a lawyer. You will find no legal advice in this blog, my videos, or anything else that I publish. If you have questions about the legalities surrounding a purchase agreement, including your ability to back out of the deal, you should certainly speak to an attorney who works in real estate. However, I can provide you with some insight into how California real estate contracts work based on my personal experience.
How do Purchase Contracts work?
Most real estate agents that you work with will use the standard California Association of Realtors (CAR) Purchase Contract. There are some areas in our state that have their own purchase agreements, but most transactions that take place in California involve the standard California Purchase Agreement. While that is a good thing in the sense that it allows you to know that most people are using the same contracts, there’s also a downside.
The California Purchase Agreement greatly favors the buyers. In fact, there are a number of ways for buyers to get out of the contract after they’ve signed it. Since buyers have the options of putting contingencies in place, they can find an out if they want one. Buyers have the option to put contingencies in place that cover the appraisal of your home, their ability to get a loan, the home passing different types of inspections, and a recent trend has seen buyers put contingencies in place that cover the sell of their own home. Buyers can also say that the deal is contingent on them closing on the transaction by a certain date.
What does that mean for the seller? Are you powerless in this situation? Not exactly, but the process of getting out of the deal is a bit more difficult when you’re the one selling a home.
Can a Seller Cancel a Contract?
Ultimately, backing out of the deal after you have signed the purchase agreement is cancelling a contract. Since the seller doesn’t have the contingency options that buyers have, that can prove a bit more difficult.
However, you can use those contingencies to your benefit. For instance, if the buyer has a contingency that says that the deal will be closed by a certain date, and that date passes, you may have found your out. However, you are required to provide the buyer with a written Notice to Perform. In that notice, you can tell the buyer that he or she has 48 hours to close the deal. If that timeframe passes, you can walk away from the transaction.
But what happens if the buyer has performed everything written in the purchase agreement? Ultimately, in that situation, there is no easy way out of the transaction for you. Take note, there is a good chance that no one will force you to sell your home. If you refuse to sign the grant deed over to the buyer, the closing officer will not force you to sign the paperwork. Unfortunately, this does open you up to serious legal jeopardy.
What Can Buyers Do?
Buyers have a number of options available to them if you back out of the purchase agreement. First of all, they can sue you for damages if they believe that your decision to cancel the contract has cost them money. They will have the option to sue you for specific performance in a California court of law. I’ve never seen this happen in a transaction, but buyers are within their rights to pursue this option.
Buyers also may ask that you reimburse them for the cost of inspections and other expenses that they have accrued during the transaction. For instance, if they paid for termite inspections, mold inspections, appraisals, and other facets of a real estate transaction, they may ask that you simply give them their money back. Doing so may serve as a negotiated agreement that keeps the case out of court.
The best way to make sure that you don’t face any of the legal issues associated with cancelling a contract is to make sure that you’re truly ready to sell your home. Spend some time speaking to your family about what the move is going to look like and mean for them. Moreover, make sure that you’ve talked to your tax professional, accountant, and anyone else who may be able to provide insight. When your ducks are in a row, you don’t have to worry about backing out of the deal.