Seller Pulled Out of Home Purchase Deal for No Reason: Now What?

Your contract sets the terms for when a seller can legally back out of the deal -- but a lawsuit may be necessary to enforce it.

Just when you think you’re on the brink of buying a home, how heartbreaking and difficult it can be to find that the seller plans to call things off. Months of work, including countless meetings with lenders and attorneys, plus stressing over your personal finances – all for nothing. Why would a seller have such a sudden change of mind, and do you have any legal remedies?

What Was the Seller Thinking?

Before you go running to your attorney, consider the situation on a human level. If you have been totally upfront with your finances and clearly interested in moving forward, it’s possible that emotions or some change in personal situation are behind your neighbor’s sudden change of heart.

If you still want to pursue the home, you may need to unpack the seller's feelings or motivations. Do you know anything about why the seller put the home on the market in the first place? If, for example, the sellers planned to move into a senior home because one of them had a serious illness, but that person made a miraculous recovery, there may be little you can say or do to convince them to sell now.

One of the most common situations is where the seller, for whatever reason, doesn't trust the buyer to make good on the deal. Perhaps the seller has some reason to believe that you can’t make the required down payment, or that you won’t be able to get approved for a mortgage, and doesn't want to keep the house off the market for long enough to find out for sure. In this situation, sit down with the seller and proffer whatever evidence you can – for example, your level of savings or other assets – to allay the concerns.

Another, less common situation is where a home is historic or otherwise emotionally significant to the seller (perhaps it belonged to the family for generations). The seller might not trust that you’ll properly care for it, or maintain its historic character. Again, you’ll need to sit down and explain that you would be an excellent steward of the home – that those historical characteristics are the very reason that you’re making the purchase. See if you can convince the seller that you have plans to improve, rather than destroy, the historical significance of the property.

Or perhaps the seller simply got a better monetary offer, and would rather sell to somebody else. It’s unethical, but it happens.

Your Potential Legal Remedies

Your legal remedies depend largely on where you are in the negotiations. Consider these two very different situations.

Are There Remedies After a Handshake Deal Falls Apart?

First, imagine that you just went to the open house, loved the property, and you both expressed mutual interest in the transaction. The seller stated a price and you said that price was within your range. You shake hands, smile, and part ways.

You call the next day to finalize the deal, and the supposed seller abruptly hangs up the phone. This surely angers you, but unfortunately, you likely do not have an enforceable “deal.” Under a legal code known as the statute of frauds – a concept borrowed from British common law – any contract for the sale of land must be in writing. A mere oral agreement and handshake are simply not enough for something as important and complex as a home purchase. Even multiple conversations over a lengthy period of time are likely not enough to convince a court that the sale is enforceable. (Sometimes parties to a home sale will draft letters of intent, depending on your jurisdiction, but these are not as enforceable as full purchase contracts).

This can surely be frustrating for the buyer who fully expected that the sale was basically a “done deal.” Remember, the statute of frauds is also an important protection for you; a seller cannot claim that you must buy a house after you express mere verbal interest. It’s a two-way street.

Are There Remedies After the Seller Fails to Honor a Purchase Contract?

Imagine a very different scenario. You went to the open house, expressed mutual interest, and had many follow-up conversations. You then both retained real estate agents and/or attorneys, you met with your lender, and both you and the seller signed a purchase contract.

Usually, a closing date is scheduled in the purchase contract, typically for four to six weeks into the future. (The closing is, of course, when the house officially becomes “yours,” after further inspections, exchanges of money, and title formalities). The purchase contract should have specific provisions articulating the circumstances under which either the buyer or the seller can back out.

Typically a buyer has the option of backing out if, for example, the seller is unable to establish title to the house, or the house fails various inspections. The seller is able to back out if the buyer is unable to secure the expected financing, or fails to make the necessary down payment.

A purchase contract will sometimes spell out harsh financial penalties for a seller who backs out for another reason (not set out in the contract), like merely getting a better offer from another buyer. In this situation, you should consult with your attorney.

In some states, you can actually sue the seller for specific performance of the contract. Specific performance means that a court will order not just money damages, but will order that the seller actually complete the purchase and transfer title to you. This is because, as a common law concept, property is considered inherently unique. You did not merely want to buy a house; you wanted to buy that specific house. Thus, a court might determine that money damages alone would not give you the full benefit of your bargain. Nevertheless, it’s common for buyers and sellers in such cases to come to a financial settlement.

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