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

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. Weeks or months of planning and paperwork, for nothing. Here, we'll discuss:

• possible reasons a real estate seller have such a sudden change of mind and whether those create openings for you to convince them to sell after all, and
• whether you have any viable legal remedies.

What Was the Home Seller Thinking in Calling Off Your Agreement?

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

Do you know anything about why the sellers 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 might be little you can say or do to convince them to sell now.

One common situation 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.

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 negotiation process. Consider these two very different situations, including:

• the seller reneging on an oral agreement for you to buy the house, and
• the seller breaching a contract you had to buy the house.

After a Handshake Deal Falls Apart: Possible Remedies

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 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 be frustrating for a buyer who thought the sale was 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.

After the Seller Fails to Honor a Signed Purchase Contract: Possible Remedies

Imagine a 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.

You most likely scheduled a closing date within the purchase contract, likely 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 contain 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 financial penalties for a home 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 far more common for real estate buyers and sellers in such cases to come to a financial settlement.