Although you may have entered a purchase and sale agreement for a piece of property, you may have second thoughts about proceeding to closing on your transaction. A real estate attorney can help you understand the potential consequences of backing out of a property agreement in Missouri.
Legal Grounds for Backing Out of a Real Estate Contract
Parties to a real estate contract may have various contractual or legal bases to terminate the deal, such as:
- Failure to Meet Contractual Contingencies – Parties may have various obligations to meet before closing, such as the buyer’s obligation to secure financing. Failing to meet a contractual contingency may give a party grounds to back out of the real estate agreement.
- Issues Found During Inspections – Problems with the property discovered during inspections may give a buyer a basis to terminate the agreement if the seller cannot or will not remedy those issues.
- Appraisal Issues – A buyer may have the right to terminate a purchase agreement if they obtain an appraisal that values the property for less than the agreed-upon purchase price.
- Failure to Close on Time – A party may have grounds to back out of a real estate deal when the other party fails to attend the closing, causing the deal to drag on for an unreasonably long period.
Consequences of Backing Out
A party that backs out of a real estate deal may face various legal and financial consequences. For example, a buyer who backs out of a purchase and sale agreement may forfeit their earnest money deposit – the money paid by the buyer when the parties executed the purchase and sale agreement. Although the earnest money deposit pays part of the purchase price, most real estate contracts allow sellers to keep the deposit when buyers fail to close.
A seller who backs out of a real estate contract can also face legal consequences if the buyer sues to enforce the agreement or seek financial compensation. In some circumstances, a buyer who files a breach of contract claim against a seller who refuses to close on a purchase and sale agreement may seek specific performance as a remedy from the court, under which the court can order the seller to complete the sale of the property to the buyer.
How to Properly Exit a Contract
A party with second thoughts about completing a real estate deal may have avenues to terminate their contract with minimal financial loss or legal exposure. Steps to take to exit a real estate contract include:
- Review the Contract – Parties should review their real estate agreement to understand their rights to back out of the deal, including the grounds under which a party can terminate the deal and what financial obligations they may have if they wish to back out.
- Communicate with Counterparties – A buyer or seller who does not want to proceed with closing can speak with their counterparty about a potential resolution or settlement that avoids costly litigation.
- Consult a Real Estate Attorney – Finally, a party who wishes to back out of a real estate deal should speak with an attorney about their legal options and the potential consequences of terminating their contract.
Contact a Real Estate Attorney Today
Contact Uthoff, Graeber, Bobinette & Blanke today for a free, confidential consultation with our legal team to discuss your options when you no longer want to move forward with a real estate deal.