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Ask Eli: Can a Seller Back Out?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Can a seller back-out of a home purchase contract?

Answer: Sellers have practically no way out of a home sale contract in Northern Virginia (or DC), but buyers have multiple opportunities to void an agreement without risking their deposit. The most common ways for a seller to get out of a home sale contract are:

  • Kickout Clause: Kickout clauses allow the seller to give the buyer notice that they intend to void the agreement if the buyer does not perform a specific action. The most common example of this is when a purchase is contingent on the buyer selling their home. Sellers can give a buyer notice of their intention to void if the buyer does not provide a bona-fide contract on the sale of their home or remove the home sale contingency all together. If the buyer fulfills either requirements, the seller must remain under contract and cannot void.
  • Buyer Default: If a buyer falls into default of their contractual obligations such as not making their required deposit on time or not applying for their loan on time (7 days), the seller may void the contract.
  • Technicality: A seller who really wants to back-out of a contract may look through the agreement for a missing initial or some other contractual technicality in an attempt to claim the contract was never formally ratified. This isn’t very reliable and I would not recommend any seller rely on this method.

Buyers (Usually) Have Outs

On the other hand, most contracts afford buyers multiple opportunities to void a purchase contract without losing their deposit. This includes the home inspection, financing and appraisal contingencies found in many contracts.

Also, if the property is located in an Association (condo or HOA/POA), buyers have a non-negotiable right to void within three days of receiving the required resale/Association package (by-laws, budget, rules & regs, etc).

Voiding Without Cause

If a buyer voids a purchase agreement outside of the legal means (contingencies) of the contract, they risk losing up to 100% of their deposit, which is usually 1-3% of the sale price.

However, sellers are not required to make a similar type of deposit as security for performance under the terms of the contract. If a seller decides to back out of an agreement without cause, the buyer is faced with a decision to accept the seller’s decision and walk away, accept a buy-out/settlement from the seller (if offered), or take legal action and sue for specific performance (force the sale) or financial remedy.

As a buyer, you hold the cards and command the most leverage over the purchase agreement remaining in force or being voided.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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