What Happens if the Seller Backs Out Before Closing?

You’ve entered into a real estate contract and are working through the many details needed to close, when suddenly the seller backs out. What happens? A real estate lawyer in Long Island, explains what factors affect how things unfold and what recourse there is for the buyer.

What Happens if the Seller Backs Out Before Closing?

First, Consider the Contract Terms

In New York State, most real estate contracts have contingencies, for example, inspection, sale of the buyer’s home, or financing. If the seller backs out for a reason that is not based on the contract terms, they may be considered in breach of contract. The contract will generally identify the means for dealing with a breach of contract.

Next, Consider the Seller’s Reason for Withdrawing

Of course, if both parties reach a mutual agreement to cancel the contract, then there is no obligation to keep to it. In addition, if the seller backs out of a contract for a reason clearly outlined in the contract, there are no legal consequences. This happens often with contracts that have a contingency allowing the seller to cancel under particular circumstances, such as if the seller’s purchase of another property falls through.

However, if the buyer does not meet the contract’s obligations, the seller is not bound to keep the contract; for example, if a mortgage is not secured by the deadline.

If There Is No Valid Reason

If there is no valid reason for the seller backing out of the agreement, the buyer has several options. In general, they have the right to demand the return of any down payment they’ve made. In the state of New York, the seller’s lawyer or a title company generally holds down payments in an escrow account until closing. If the seller backs out before closing, the down payment will usually be returned in full to the buyer.

The buyer might also be able to seek compensation from the seller for financial losses due to the seller’s breach of contract, such as attorney or inspection fees or even the difference in price of the property they end up having to buy. In some cases, the buyer may petition a court to order the seller to proceed with the sale, especially if the contract is for a unique property.

Consult a Real Estate Lawyer in Long Island

An attorney is an invaluable resource in a real estate transaction, since attorneys can review the contract to make sure it’s legally valid and advise their clients on effective solutions when issues arise. If necessary, your attorney can negotiate with the other party’s attorney to reach a resolution outside the courts. Litigation can be costly and time-consuming, and a lawyer can help with negotiating a settlement rather than pursuing a lawsuit.

If you are involved in a situation where the seller has backed out of the contract, reach out to the law offices of Chiariello & Chiariello in Long Island. We are experienced in the field of real estate law, and ready to advise and assist you with your real estate needs.

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