A buyer can always back out of a contract. A contract is just an agreement between two people – it’s governed by contract laws. Either party can back out at any time; the question is what will the damages be?
Assuming we’re near closing and the buyer decides to back out of a real estate deal, here’s generally what will happen – at this point, near closing, and assuming all the contingencies have been satisfied and we’re “clear to close.”
- The earnest money stays in the trust account where it was deposited.
- The seller has the option of simply keeping the earnest money and doing nothing, OR
- The seller may re-list the home, even for a slightly lesser price, in order to obtain a fast closing, and then
- The seller may sue the buyer for the difference in price between the breached contract and the new sales price, and may add on her costs (whatever per diems – taxes, utilities, additional interest amounts).
- The buyer’s earnest money deposit will be released to the seller as a down payment on these damages.
This is why it’s really important as a seller to have a decent earnest money deposit up front.
Contract tip: Make the earnest money deposit due after due diligence to avoid complications. Then make sure to obtain the deposit evidence to make sure the seller is protected in the deal.
*Note: this is general information which can not be relied upon without knowing the specific details of your circumstances, which may cause the info to be inaccurate. You must consult an attorney for your specific case to be sure of your rights and obligations.