Can you sue a seller for backing out of a real estate contract? If you’re a real estate wholesaler, then you’re certainly going to experience deals when the seller wants to back. It’s very frustrating, especially if you’ve already assigned the contract to your new buyer.
Maybe you’ve found yourself with one of these sellers, and left wondering what to do now. I mean, they’ve signed a contract. They should have to perform, right? The truth is, you can’t drag a seller to closing and hold their arm while they sign.
Most contracts specify the remedy for non-performance by both parties. Typically, a buyer must sue the seller for specific performance. This is a costly and time-consuming process. Most of the time, it’s not worth it. As a professional, you must take each seller case-by-case and do what you feel is the best, both ethically and professionally. You’ll certainly find yourself in situations where you will both agree that its acceptable to just call the whole thing off.
Reasons Why Sellers Back Out of Real Estate Contracts
There are various reasons why a seller may want to back out of a contract once it has been signed. Let’s have a look at some of the most common reasons:
Sellers will get emotionally attached to a property, especially if they grew up in the house or if their parents lived in the house for many years
Seller Occupies the House
It can be overwhelming for a seller to start the process of packing up everything they own and moving into a new house. This rings true for owner-occupied homes. Mainly ones that have many years of memories.
Seller Has Remorse or Regret
Motivation doesn’t always accompany good decision making. Sometimes a seller really NEEDS to sell the house for financial reasons but doesn’t really WANT to sell the house. This can cause the seller’s remorse after the contract has been signed.
Seller Received a Higher Offer on the Property
We all love it when a seller signs a contract and then receives a higher offer from another real estate wholesaler. Ouch! In a competitive real estate market you’ll find this the most common reason for a seller backing out of a contract.
How to Protect Your Interest in a Real Estate Contract
Suing a seller for backing out isn’t the only option that you have when it comes to protecting your interest. In fact, it may be the longest and most expensive way to resolve the dispute.
Record an Affidavit and Memorandum
There’s a way to secure your interest in the property once you have a signed contract with the seller of a property. Technically once the contract is signed, both parties are contractually obligated to perform on the deal. If you run into a situation where the seller wants to back out of the contract, then you have the option of filing an affidavit and memorandum with your local courthouse.
Watch the video below for more information on how an Affidavit and Memorandum work.
So can a seller back out after accepting an offer? Well the answer is both yes and no. Yes, of course, they have the option to. Does that mean that they won’t have to pay a fee for doing that? NO. Eventually, you’ll be compensated for the lost revenue.
For more tips and foundational training on how to wholesale houses, check out the Bad Ass Real Estate Wholesaling Virtual Coaching Program. This will teach you all of the fundamentals that are required to be a successful real estate wholesaler.