What Happens if the Seller Backs Out of Our Home Purchase?

Usually, no. Once you and the seller sign a purchase agreement, both of you are bound by its terms. A seller who wants out has to point to a right to cancel that the contract actually gives them.

I'm Jeanette Nelson, a REALTOR® with Jeanette Nelson Real Estate, Keller Williams Realty, serving Orange County, Huntington Beach, Costa Mesa, Fountain Valley, and surrounding areas. When a seller hesitates, my first step is to read the contract closely and keep everyone focused on its terms, not on emotions.

This is general information, not legal advice. Every contract and situation is different, so speak with a California real estate attorney about yours.

Your purchase agreement spells out when either side can cancel. Common examples on the seller's side include:

• A buyer contingency or deadline was not met, and the contract's notice steps were followed.
• The sale depended on a condition that both sides agreed to in writing, like the seller finding a replacement home.
• Both sides agree to cancel and sign mutual cancellation instructions.

If none of those apply, a seller who refuses to close may be in breach of the contract.

Specific performance is a court order requiring the seller to complete the sale as agreed, instead of just paying money damages.

California Civil Code section 3387 presumes that money cannot fully make up for a seller's failure to transfer real property. For a single-family home that the buyer intends to live in, that presumption is conclusive under the statute. In plain words, the law treats each home as unique.

That does not mean every case ends with a forced sale. Courts look at the full facts, and lawsuits take time and money. An attorney can tell you whether it makes sense in your situation.

A lis pendens, or notice of pending action, is a recorded notice that a lawsuit affects title to a property. Under California Code of Civil Procedure section 405.20, a party to an action that asserts a real property claim may record one.

Once recorded, it warns anyone else that the property is the subject of a dispute. That can make it difficult for the seller to sell to someone else while your claim is pending. There are strict rules for recording and serving it, so this is a step for your attorney.

Your earnest money deposit sits with the neutral escrow holder. Escrow generally will not release it without signed instructions from both sides or a court order.

California Civil Code section 1057.3 adds protection. If a buyer or seller fails to sign the documents needed to release funds within 30 days after a written demand, and there is no good faith dispute, that party can be liable for the deposit amount, plus treble damages of at least $100 and no more than $1,000, plus reasonable attorney's fees. The section applies to homes with one to four units where at least one unit will be occupied by the buyer.

If the seller is the one backing out, ask your attorney whether to demand the deposit back or keep the deal alive.

1. Stay calm and do not sign anything new until you understand it, especially a cancellation.
2. Keep doing your part. Meet your own deadlines, keep your loan moving and keep your deposit in escrow. Your lender can tell you how long your rate lock and approval last.
3. Put everything in writing. Save emails, texts and signed documents.
4. Ask for the seller's reason in writing so it can be compared to the contract.
5. Talk with a real estate attorney right away. Deadlines and recording rules can affect your options.

A seller's hesitation sometimes comes from something that can be worked out, like timing for their move.

Most of your protection is in the contract you sign. Read every deadline, contingency and cancellation term before you write the offer. My article on what happens in escrow explains the steps and deadlines, and my article on the buyer agreement explains how your representation works.

Also protect your money. Confirm wiring instructions by phone with escrow, as explained in my article on wire fraud.

If you are buying in Orange County and want to understand your contract before you sign, I'd love to walk through it with you. Call or text me at 714.366.8575 | DRE: 01397168, or contact me. Jeanette Nelson is a REALTOR® with Jeanette Nelson Real Estate, Keller Williams Realty, serving Orange County, Huntington Beach, Costa Mesa, Fountain Valley, and surrounding areas.