What Can Sellers Do if the Buyer Backs Out of the Deal?


The selling process can definitely be intense and even overwhelming at times. After all, we’re talking about a massive investment. There are plenty of efforts made to find the right buyer who is qualified and interested in buying your home, but even after you think you’ve found the right buyer that will see the deal through, there’s still a chance that they may back out.

Now what?

If your buyer backs out at the last minute, it could throw a wrench in your plans, especially if you’ve already bought another house and worked out both closing dates to coincide with one another. Luckily, there are steps you can take to minimize the repercussions, but you’ve got to move quickly to lessen the blow.

Go Over Your Contract First

If the buyer decides to back out of the deal, the first thing you need to do is pull out your contract and go over it in great detail. Check to see if there are any contingencies included that address what you can do if the buyer decides not to go through with the deal as planned.

It may be that the buyer is in breach of the contract if they choose not to go through with it. In that case, you may want to talk to a real estate lawyer to see what type of recourse you’re eligible for or what avenues you can take to be compensated for your inconveniences.


Find Out What Happens With the Deposit Money

The majority of real estate contracts require that buyers provide an earnest deposit to the seller which goes towards the purchase price of the home. This is meant to be a sign of good faith on the part of the buyer showing that they’re serious about buying the home. This money is held in escrow until the deal closes.

If the buyer backs out of the deal with no contingency in the contract that allows them to do so without penalty, you may be able to keep that deposit. However, some circumstances may allow the buyer to take the deposit back, so you will definitely have to check your purchase agreement.

Consider Taking the Buyer to Court

While not an ideal situation, you may be able to sue the buyer and receive some sort of financial compensation for your troubles. Keep in mind that if your purchase agreement stipulates that keeping the deposit is considered the same as liquidated damages, going to court is probably not an option. However, if the contract doesn’t specify any limits on your ability to take the buyer to court if they breach the contract, you may file a lawsuit.

This will help you to recover any damages associated with having to put your home back on the market and possibly sell for less money that what your original buyer agreed to pay. You may also choose to ask a judge to force the buyer to follow through with the deal. In the case of the latter, you’ll have to show that not only is the contract is reasonable, it needs to be enforceable too.

The main type of monetary recovery that you may recoup if your buyer is in breach of the contract is the difference in price less the market value of the property at the time of breach. The judge will typically look at what the home ends up selling for – in a reasonable amount of time – after the buyer breaches the contract.

For instance, if the buyer originally agreed to pay $700,000 for the home and you end up selling for $600,000, you may be entitled to $100,000. You might also be eligible to recover expenses associated with having to re-market the property to find a new buyer, as well as the costs associated with maintaining the property if you’ve already moved into a new home.

The Bottom Line

It’s incredibly frustrating when a buyer backs out of a real estate deal, especially considering all the time spent marketing the property to find the right buyer, negotiating the offer, and waiting to go through escrow. Having to start right back at square one can certainly be a highly annoying position to be put in. At this point, you’ve got some options. Just be sure that whatever option you choose is done with the sound advice of a real estate professional.