Can a Seller or Buyer Back Out of a Contract What to Know About Backing Out of a Contract

When a Real Estate client desires to break a Real Estate contract, you know the next few days of your life will probably not be too pleasant. It is usually a highly charged emotional event when people want to break a contract!

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 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 significant 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.

Real Estate Contingencies Allow You to Cancel Contract

The most common contingencies include the buyer’s ability to obtain financing and the home inspections they would like to perform. These include home, pest, radon, well, mold, lead paint, and 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.

Real Estate agents will change the listing status in the multiple listing service to either contingent or pending when a home has an accepted contract.

Over the course of my real estate career, buyers and sellers have asked me if I can back out of my real estate contract. Different answers depend on who asks the question (a buyer or seller) and where they are in the transaction process.

Can You Back Out of a Contract?

Can a seller back out of a real estate contract will bring a different answer than a buyer.

Below you will find an explanation and the excellent reference above that comprehensively explains.

There are always consequences for breaking a contract. For a seller, the consequences are far more significant than for a buyer if you try to back out of a sale. The buyer can, in fact, sue for performance. The buyer is typically liable for 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 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 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 earnest money deposit 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. A buyer could sue you for performance and force you to sell your home.

Sometimes sellers can feel remorse and feel like they no longer want to sell after signing 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 difficult. There could be an endless amount of reasons.

Getting out of a Massachusetts Purchase and sale What do you do if you sell your home, have a signed contract, and feel 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 will not be too happy with your decision.

What Sellers Should Do When Trying to Back Out of a Contract

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 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 when they were under contract. Be prepared to buy down their mortgage rate if they ask.

As a seller, you must remember that you are breaking a contract in this circumstance. To remain in your home, you must be as pleasant as pie to a buyer.

The buyer could easily drag you into court to force what is known as “specific performance,” where you are forced to sell your home and 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.

Final Thoughts on Terminating Contracts

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 buyers or sellers terminating a 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 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 36+ Years.

Thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!

I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.