Massachusetts Real Estate contractWhat to Know About Backing Out of a Contract

When a Real Estate client expresses a desire to break a Real Estate contract, you know the next few days of your life will probably not be too pleasant. When people are looking to break a contract, it is usually a highly charged emotional event!

In Massachusetts, we are a two-contract state. When a buyer wishes to purchase a property, more often than not, they will fill out what is known as an offer to purchase contract. This is later followed up with a purchase and sale agreement with the same terms and conditions as the offer form but spelled out in much greater detail.

The offer to purchase contract includes all the major terms in the deal, including the offer amount, a consideration which is the amount the buyer is putting in escrow to secure the property, as well as the agreed-upon closing date and any contingencies. The most common contingencies include the buyer’s ability to obtain financing and the home inspections that they would like to perform. These include home, pest, radon, well, mold, lead paint, and possibly others.

The typical amount you almost always see for initial consideration on a Massachusetts offer form is $500-$1000. When the buyer signs the purchase and sale agreement, the buyer will typically put a balance of 5% in escrow.

Although this is the amount you see most often, a deposit is always open for negotiations. Sometimes a buyer might not quite have the 5% to put down.

Over the course of my real estate career, I have had both buyers and sellers ask me can I back out of my real estate contract? There are different answers depending on who is asking the question (a buyer or seller) and where they are in the process of the transaction. Below you will find an explanation along with the excellent reference above that gives a comprehensive explanation.

There are always consequences for breaking a contract. For a seller, the consequences are far greater than for a buyer if you try to back out of a sale. The buyer can, in fact, sue for performance. The buyer, however, is typically held to the liability of no more than their escrow deposit.

The other contract that people ask about breaking is the agreement between a seller and a Realtor. It probably does not come as any surprise that several clients become unhappy with their Realtor and want out. The article above also explains all you need to know about getting out of a contract with a real estate agent.

Breaking a Real Estate contract as a buyer

Most of the time, the person that wants to get out of a Real Estate contract is the buyer. There could be many reasons why a buyer would wish to terminate a contract, from general home inspection issues to the discovery of mold or radon or some other unforeseen problem with a property.

If the buyer has a contingency within the contract for the reason they wish to terminate, then there is no issue, and the buyer will receive their deposit back in full. There is always the possibility that a buyer could try to back out of a Real Estate contract after all their contingency dates have lapsed.

In this case, the seller would be entitled to keep the money that is in escrow. It is possible that the seller could sue the buyer for damages, but in my experience, most of the Real Estate contracts that I have seem to limit the seller’s damages to the deposit amount.

Breaking a Real Estate contract as a seller

What about the seller backing out of a contract? This is a question that I often have to educate my seller clients on. Many folks do not realize that an Offer to Purchase Real Estate in Massachusetts is a BINDING contract. This means that a buyer could sue you for performance and force you to sell your home.

Sometimes sellers can get remorse and feel like they no longer want to sell after they have signed a contract with a buyer. There could be any number of reasons for this happening. Maybe the house the seller wanted to purchase is no longer available, or some health issue crops up with one of the parties that makes selling not an easy task. There could be an endless amount of reasons.

Getting out of a Massachusetts Purchase and sale

What do you do if you are selling your home, have a signed contract, and feel that you want to break the contract? The 1st thing you would want to do is make your listing agent aware of the situation and get in touch with the buyer’s agent.

As a seller, you will probably feel like you are on a stormy island of your own as all the other parties in the transaction are not going to be too happy with your decision.

You can more than likely expect the following:

  • Be prepared to release the buyer’s escrow money to them with any accumulated interest.
  • Most buyers will more than likely want to be reimbursed for any out-of-pocket expenses they realized during the transaction. These expenses could include inspections, mortgage application fees, mortgage lock-in fees, attorney expenses, etc.
  • Additional complications could include interim housing expenses if they have already sold their home and were expecting to move into yours.
  • A change in interest rates could be another complicating factor if rates have risen during the time they were under contract. Be prepared to buy down their mortgage rate if they ask.

As a seller, what you need to remember in this circumstance is that you are breaking a contract. If you really want to remain in your home, you need to be as nice as pie to a buyer. The buyer could easily drag you into court to force what is known as “specific performance,” where you are not only forced to sell your home but also reimburse the buyer for any of their costs associated with this mess.

Obviously, the best-case scenario would be a very understanding buyer who lets you excuse yourself from the contract. Not every buyer is going to be so kind. If you find yourself in this situation, a competent Real Estate attorney would be a must! A Real Estate attorney would be able to negotiate the best possible settlement with the buyers or their lawyer.

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About the author: The above Real Estate information on breaking a Massachusetts Real Estate contract was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 34+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service the following towns in Metrowest MA: Hopkinton, Milford, Southboro, Westboro, Ashland, Holliston, Upton, Mendon, Hopedale, Medway, Franklin, Framingham, Grafton, Northbridge, Shrewsbury, Northboro, Bellingham, Uxbridge, and Douglas.