Can a Condo Seller Back out of a Contract?
After searching for the perfect condo, you found the perfect new build in your price range. You put in an offer, and the seller accepted. Now, they’re saying they’ve changed their mind and have the right to do so because construction on the condo isn’t complete yet. Can the seller do that?
Contracts are binding, and in most circumstances, a condo seller doesn’t have the option of backing out or changing their mind. If you’re trying to purchase a condo, know your rights and when a seller can change their mind after accepting an offer.
Can Sellers Back out of a Condo Contract?
In specific circumstances, sellers can back out of a contract. Sometimes, things don’t work out when buying or selling a condo. Often, something on the buyer’s end causes the issue. For example, a pre-purchase inspection might bring up issues with the house that the buyer decides are too expensive to fix, or it turns out the home’s title has too many problems.
In some cases, the seller is the one who wants to back out of the contract. Some sellers might need to find a new home to live in before selling their current one. If they can’t find a new home, they might want to cancel the sale.
Greed can motivate a seller, too. For example, the real estate market is more seller-friendly today than it was a year or two again. Boston’s home prices were up 10.5% in 2021, and condo prices were up 6.6%. If a condo seller made the offer with a buyer in early 2021 and closing hadn’t happened yet, they might want to try to sell the condo to someone else for more money.
Fortunately for buyers, condo sellers usually can’t legally cancel a contract simply because they got a better offer or anticipate getting a better deal. If that happens to you, you may have a right to take legal action against the seller.
However, there is an exception to the rule called a kick-out clause. A kick-out clause allows the seller to keep showing the home to prospective buyers even after they’ve accepted a contingent offer. As the name suggests, a contingent offer is an offer containing contingencies, or conditions required for the sale to go forward.
In other words, for the kick-out clause to work, the original buyer’s offer needs to include contingencies, and the new offer needs to come from a buyer who doesn’t include contingencies. The seller can then choose the non-contingent offer over the contingent, often getting a higher price for the condo, too.
Times When a Condo Seller Can Back out After Accepting an Offer
In addition to the kick-out clause, a seller can back out after accepting an offer in a few other circumstances.
A seller might also build contingencies into the contract that give them the option of backing out if something should or shouldn’t occur. For example, a seller might include a contingency granting them the right to find a replacement property. Buyers often have contingencies in their contracts, too. For example, a buyer might make the purchase contingent on securing financing or the home passing inspection.
Another common contingency is an appraisal contingency. With an appraisal contingency, buyers can back out if the home appraises for less than the purchase price, as they most likely won’t get the financing needed to purchase the property.
If a buyer doesn’t uphold their end of the contract, a seller usually has the right to cancel the contract. For example, a seller can go back on an offer if a buyer misses deadlines for paying earnest money or doesn’t make the appropriate deposits.
Sellers can also back out of an offer if they can prove that the buyer committed fraud. For example, a buyer might misrepresent their financial status or other information that causes damage or delay for the seller.
What Happens if a Seller Changes Their Mind After Accepting an Offer?
If a seller changes their mind after accepting your offer on a condo, they might try to break the contract or convince you to walk away from the deal. They can do that in several ways. If the condo already exists and the inspection brings up issues that the buyer wants to be corrected, the seller might refuse to negotiate with the buyer to correct the problem.
In that case, a buyer might decide to walk away from the deal, provided there’s an inspection contingency clause. The seller can continue to market the condo, attempting to get a better offer.
Sometimes, there might be an issue with the contract that causes the seller to change their mind. If the seller or their attorney realizes there’s a problem with the contract during the five-day review period, they can cancel it without any consequences.
If a condo seller wants to try to get a higher price for a condo that’s still in construction, they don’t have the right to back out of the contract, but they might still try.
What to Do if a Seller Cancels a Contract
Should a seller cancel your contract or tell you that they want to cancel it, you have several options. One option is called specific performance, which forces the seller to go through with the sale. This option involves taking the seller to court and seeking a court order requiring the seller to hold up their end of the agreement. The legal process can take some time, potentially a year or more, dissuading some buyers from going this route.
Another option is for the buyer to sue the seller for breach of contract. The buyer can sue for damages, such as the cost of living in temporary housing while waiting for the condo to be finished, the cost of the home inspection, and legal expenses.
Buyers can also ask a court to issue a Memorandum of Lis Pendens if a seller tries to back out of the sale contract without a valid reason. A Memorandum of Lis Pendens is a document that is issued by a Court when a showing is made that title to the property is in question. Once issued by the Court, a Memorandum of Lis Pendens is recorded at the registry of deeds for the county and district where the condominium property at issue is located. The effect of the Memorandum of Lis Pendens is that anyone who buys the condo unit while a buyer’s lawsuit against the seller is pending takes the property subject to the judgment that may issue in the buyer’s Massachusetts court action. A Memorandum of Lis Pendens makes it difficult for the seller to find a new buyer for the condo.
Calabrese Law Associates Can Help You if a Condo Seller Gets Cold Feet
If you’re in the process of buying a condo and the seller suddenly gets cold feet or wants to back out, the attorneys at Calabrese Law Associates can help. We’ll review your contract and listen to your situation to help you determine how to move forward. We’ll make sure you understand your rights under Massachusetts law so that you can get the condo you want to buy as quickly as possible.
Contact us today to schedule a consultation with one of our experienced condo lawyers.
This publication and its contents are not to be construed as legal advice nor a recommendation to you as to how to proceed. Please consult with a local licensed attorney directly before taking any action that could have legal consequences. This publication and its content do not create an attorney-client relationship and are being provided for general informational purposes only.
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