Breach of Contract

Home Seller Breach of Contract FAQ

If a home seller backs out of a contract, does the home buyer have legal rights?

Yes, but legal recourse depends upon the terms of the purchase contract, and this varies largely from one transaction to the next. There is a significant difference between a deal that falls through because a contingency cannot be satisfied, to one that falls through for a reason that is not specified in the contract. A contract that falls through for a reason not provided for in the contract is in fact a breach or default, and can be filed against in a court of law.

However, it should not be automatically assumed that just because the seller isn’t going through with the sale, the contract has been breached. Factors such as inspection contingencies could be delaying the sale process. And inspections may in fact reveal defects that the seller refuses, and is not legally responsible to fix, thus legitimately releasing the seller from the contract.

What are legal reasons that protect a seller from canceling a purchase contract?

A seller can legitimately default on a purchase contract if inspection issues or home repairs cannot be satisfied. If there are no default remedies or dispute resolution clauses in the purchase contract stating the seller must fix said problem(s), a seller can legally reject the sale of a home on the grounds of irreconcilable contingencies. Sellers can also legally claim contract damages; i.e. the accepted purchase price of the home turns out to be significantly less than the sale price of another home in the immediate area that is appraised at equal or lesser value, prompting the seller to cancel the existing offer and demand a higher price.

A purchase contract can also include a clause that states the sale of a home is contingent upon the seller’s purchase of a new home. If the purchase of the new home falls through, the seller can legally stop the sale of the present home. And occasionally, sellers can have a change of heart that cancels the sale; i.e. the home is a family estate with emotional value, and the seller decides not to relinquish property rights. In this case, however, a buyer has more ground for filing a claim, as emotional contingencies are rarely allowed for in purchase contracts.

Further, the default of a sale may occur if there is more than one home owner involved, as in the event of a marital separation, or the property being sold is an estate in which all heirs must agree to the terms of the sale. If any owner(s) does not agree to the sale of the home, or to the terms involved, the sale is defunct. The seller who originated the sale has the right to withdraw from the purchase contract, and will not be subjected to legal consequence.

What are the legal steps a buyer can take if a breach of contract has occurred?

If you believe that your seller has illegitimately backed out of a home sale, the first thing to do is review your purchase contract for unsatisfied contingency clauses, default remedies, or dispute resolutions. If your purchase contract does not include these, or the conditions stated in the contract do not cover the reason for the default, you can hire a real estate attorney to file a lawsuit for monetary and punitive damages based upon seller fraud and deceit. You may also be able to sue the seller for “specific performance,” which designates the real estate property as being unique and specific, and can force the seller to complete the sale under court petition. Before filing a claim against the seller, however, review the contract for clauses that state disputes must be handled in small claims court or through arbitration or mediation, to protect your rights as well.

If there is a problem between a buyer and seller that delays or stops the purchase of a home, it is always best to try and fix the problem at its source, i.e. contacting the lender, settlement agent, broker, etc. However, if this approach fails, and you feel you are entitled to legal recourse, consult a knowledgeable real estate attorney to review the purchase contract, answer questions about contract default, and give legal advice on the options available to you. To find a skilled real estate attorney in your area, please search our legal directory.