11th Hour Nightmare: What Happens When Your Buyer Backs Out?

11th Hour Nightmare: What Happens When Your Buyer Backs Out?


It is not a very common occurrence, thankfully, although it happens. Is it allowed? Does it come with repercussions? It absolutely can! 

First, it’s important to note that if you’re a buyer, and you get cold feet, the best time to back out of a deal is before signing the purchase agreement, which is the contract outlining the terms and conditions of your home purchase. Since the purchase agreement is legally binding, it’s less messy to walk away before you and the seller sign it. 

This blog post focuses on the options a seller has when a buyer wants to cancel after both parties have signed the agreement. 

Review Your Contract


The devil is in the details! 

The first step is to review your contract with your real estate attorney. There should be terms that address your options if the buyer pulls out of the deal, and they may be in breach of contract. 

What’s the recourse? Talk with an experienced real estate lawyer! 

See if You Can Keep the Earnest Deposit


When all goes well in a residential real estate transaction, a buyer usually makes an earnest money deposit, which ranges from 1 percent to 3 percent of the purchase price. Earnest money demonstrates a commitment on the buyer’s part. 

When the sale goes through, the earnest money is applied to the purchase price of the property. 

What happens when the buyer reneges? In that case, the seller may be able to pursue any legal damages they incur provided there are no stipulations in the contract that say otherwise. Buyers often attempt to limit Sellers’ damages to just the earnest money deposit. This is commonly known as liquidated damages. 

Go to Court


You never want it to come down to this, but a deal is a deal, and when the buyer breaches the contract, it may be time to pursue legal damages. 

Your attorney will let you know if the contract includes limits on your ability to sue the buyer and if it’s worth it. Absent the limits, you may proceed with a lawsuit, and here is how the legal recourse can play out:


  • You may recoup damages related to having to relist your home on the market such as your monthly expenses or carrying costs on the property. 


  • You may be entitled to the difference if the property eventually sells for less money than what the buyer agreed to pay. Let’s say the buyer agreed to purchase your home for $800,000, and you sell it for $690,000. You may be awarded $110,000. 


It doesn’t get much more frustrating than marketing your home, finding a buyer, negotiating, waiting to go to closing, preparing to close, and then having the rug pulled out from under you because the buyer wants to walk. Fortunately, you have protections and direction when you have a seasoned real estate attorney by your side. 


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