The Home Buyer Is Trying To Back Out, What Are My Options?
When you go through the trouble of getting your home ready to sell, which often includes many out-of-pocket expenses for necessary repairs, a few improvements, and staging, it's only the start of a long road. Though homes are selling at a faster pace than in the past few years, those weeks are an emotional and anxious wait.
Making it worse in some cases are sellers which have found another home, put in a purchase offer that's been accepted, and closing is drawing near. Few families can afford to pay two mortgages for more than a month or two; so, this usually leads to a price reduction and/or buyer incentives.
Now that you have a valid offer and have accepted it, your focus turns solely to your new home. Scheduling the move, packing-up everything you own, lightening the load by hosting a yard sale and donating stuff, and scheduling utilities to be transferred consumes every moment of free time. Then comes the very big shock from your listing agent--the buyer wants to rescind their offer and back out of the sale. Regardless of why, you want to know what you can do.
Dynamics of a Selling a Home
First, it helps to know something about the dynamics of selling a home. Since the majority of people only do this once, at most twice, in their lives, it comes as a complete surprise that there are startling statistics in real estate transactions. Some transactions are either delayed or derailed completely because of "clouds" on the title. Defects in the language, clerical errors, hidden spouses, and liens are generally the source.
Many homeowners watch the For Sale signs in their neighborhoods. In buyer's markets, it's very common to see a pending sign pop up after two or three months on the market because the DOM are often much longer when there are fewer buyers than sellers. Just as common is when the pending sale sign comes down and the For Sale sign is left standing. --About.com
Buyers also become too big a risk to lenders because they do things like open new lines of credit to purchase furniture or other items and that wreaks havoc on their debt-to-income ratio. That figure is the difference between their gross monthly income and their expenses. Other times, the bank orders a second home appraisal and that can have a negative impact for both parties.
Then, there's the matter of being involved with the wrong agent. Some home sellers only discover they've put the marketing of their home in the wrong hands and are stuck in a binding legal contract that extends past the actual listing. Should that be the case, you might have to wait-it out or use the language in the listing agreement to your advantages.
Your Options as a Seller When a Buyer Tries to Back Out
You should also know, there is a time period which the buyer can back out for any reason, which is usually due to buyer's remorse. There are other outs, as the laws favor consumers, such as a home inspection which uncovers costly repairs. Banks sometimes pull financing because the buyer has emptied their bank account, which ups the risk of missing their first monthly installment.
However, this isn't to say sellers are completely helpless, there are options, and none are attractive:
- Contact the buyer's agent through your own to try and work out a deal. If the reason for wanting to back out is because of repairs the buyer doesn't want to be responsible for paying, then make said repairs and save the sale.
- Offer to pay all of the closing costs. Should the transaction put the buyer on the hook for all or some of the closing costs, then pay all those expenses to keep the deal from falling apart.
- Try to work out a different time frame. If the contract contains a selling contingency for the benefit of the buyer, and their home has not sold, try to rework the closing schedule. While this will put a burden on you, it may facilitate a successful transaction.
- Take legal action. Under the law and in the vast majority of sales contracts, there is a clause which gives both parties the power to use what's known as "specific performance". There have actually been cases of buyers being forced by a court to go through with their purchase.
Another option is to let the buyer know you won't hold them to the purchase but will keep their earnest money deposit. Some buyers will react by going through with the transaction while a few, such as people who really don't want the home, will cut their losses and move on. The good news is you're not without any recourse and do have options at your disposal.