When the seller has second thoughts

You’ve found a place you love and signed the contract…then the seller backs out. Is this even legal?

In most states, home buyers have the protection of a cooling off period. The details vary from state to state, and a cooling off period doesn’t apply to auction sales, but the key point is that if you have a change of heart it can be possible to back out of a purchase.

What’s less well known is that the seller of the property may also be able to wriggle out of a contract.

The contract is legally binding

A contract of sale is a legally binding document. So once both parties have put their name to it, it’s no mean feat to walk away. But it can be done.

If the contract features a clause that allows the seller to back out – or ‘rescind’ on the contract, they can refuse to go ahead with the sale. That said, there needs to be reasonable grounds to do so. A simple change of heart won’t cut it.

If there are no reasonable grounds, what happens from here depends on the buyer. Some may sympathise with the seller’s situation and walk away from the sale. After all, there will always be other properties.

However, others may ask their lawyer to issue a letter of demand to enforce the sale. This can be the case if the buyer suspects the seller has plans to relist the property to secure a higher price.

At the very least, a jilted buyer should be able to recover the costs of the purchase to this point, such as pre-purchase inspections and conveyancing fees.


What is conveyancing?

Conveyancing refers to the process of transferring ownership of real estate from the current owner/s to a new owner/s. For more information, download our guide.

Download now

Check the fine print

Seller’s remorse does happen. But once the contract of sale is signed it is difficult, and potentially costly to back out. For anyone selling a home, this makes it critical to be very sure you are happy to hand the place over to a new owner.

For buyers, the possibility of this situation – as rare as it may be, highlights the need to have the contract of sale scrutinised by your legal rep before you sign on the dotted line.

No matter which side of the fence you’re on – buyer or seller, it makes sense to fully understand what you’re in for, and the best way to do this is by having a team of experts on your side.

Posted in: Property market

TBA Broker Suzane 400X400

Talk to a Mortgage Choice expert