The goal of any real estate deal is for all parties to come away happy – whether it’s the home seller pleased with the profit, the buyer excited to start life in a new home or the real estate agents satisfied with the clients' success and commission.

But what if, before that deal closes, it doesn’t feel right anymore? How do you, as the buyer or seller, back out of a transaction without angering all other parties?

Whether the deal doesn’t seem quite as good as before or you just have cold feet, there are opportunities to back out. With the right contract contingencies and clear communication with your agent, it’s possible to emerge relatively unscathed – as long as you don’t wait too long.

[Read: Sellers: Your Real Estate Deal Fell Through. What's Next?]

Key to backing out when necessary – and avoiding it altogether – is working with a real estate agent you trust has your best interests in mind and expressing any reservations early on.

By maintaining good communication with your agent, you can avoid confusion about the home purchase or sale process before entering into negotiations, says Josh Anderson, owner of The Anderson Group Real Estate Services with Keller Williams Realty in Nashville, Tennessee.

“Really what brings [a successful deal] together is a good real estate agent that knows the market, knows how to consult with their client and help them to understand [the deal],” Anderson says.

If you’re early in the housing search or preparing your home to sell and you have second thoughts, a frank discussion with your agent is best. Explain that you want to put things on hold, either for a period of time or indefinitely.

A good agent will be receptive to your feelings, says Annemarie Stephens, associate broker for Coldwell Banker Residential Brokerage in the District of Columbia. While marketing a home or searching for properties requires an agent's time and money, agents generally don't want clients leaving the transaction with buyer’s or seller’s remorse.

“At the end of the day, it’s always about the client,” Stephens says.

If you've already entered into a contract on a home, backing out of a deal can be trickier. Here's when killing a real estate deal will cause as little damage as possible:

  • Before you’ve gone under contract.
  • When the house appraises for less than the sale price.
  • When the inspection reveals significant problems with the house.
  • If the buyer’s house can’t sell, seller can use “kick-out” clause.

[Read: Buyers: Your Real Estate Deal Fell Through. What's Next?]

Inspection and Appraisal Issues

Many home purchase contracts include the contingency that the buyer (and lender) must be satisfied with the inspection and appraisal, the results of which could lead to further negotiations.

In today’s tight seller’s market, it’s relatively common for a property to appraise for lower than the agreed-upon sale price due to bidding wars or a seller's elevated asking price. When that happens, the buyer and seller must come to an agreement on how to proceed: either the buyer pays more out of pocket or the seller agrees to come down in price.

Stephens recalls a recent negotiation where the listed home was appraised for as much as $250,000 less than the purchase price. The buyer was financing the deal and needed the seller to come down significantly on price, which the seller wasn’t willing to do.

“When you run into a situation like that, the negotiation becomes very sensitive,” Stephens says. With the seller unwilling to negotiate further, the buyer walked away from the deal.

Similarly, a home inspection that reveals more issues than anticipated could leave the buyer less than excited to call the place home. If you’re not comfortable paying for major changes, or if the seller is unwilling to make repairs prior to closing, you can walk away from the deal.

“There’s probably a certain amount of people that use the inspection to get out of a legally binding contract,” Anderson says. “But if they’re adamant about getting certain things done, and the seller’s not willing to do it, ultimately it’s a bad deal.”



"Kick-Out" Clause

It’s common for a real estate contract to guarantee the sale, contingent on the buyer’s ability to sell his or her current home. In today’s market with low housing inventory, it may actually be more difficult for the seller to find a new home to purchase as the seller is facing bidding wars and high prices in his or her own search.

Kevin Strong, a Realtor in Salt Lake City, notes the possible need for contract contingencies or for the seller to rent for a short time after the property closes. He says he recommends agents ensure their seller has a plan and even a backup for where to move after the deal closes: "Make sure they have a place to go."

With either of these conditions, the other party can protect his or her best interests with a "kick-out" clause. Typically used when the buyer must sell an existing home before purchasing another, this clause allows the seller to continue showing the home while the buyer's home is listed. If the seller receives a better offer, the original contract can be terminated.

The kick-out clause is a solid option for a seller worried about missing the better deal. You don’t necessarily have to back out of a contract to keep showing your home to potential buyers.

[Read: How to Break Up With Your Real Estate Agent.]

Early Exit

When backing out of a real estate deal, the worst thing you can do is wait. The second it feels wrong, you should let your agent know.

“In the case of a client who is getting cold feet, I don’t want to take them further into a transaction so that it gets to the point that they can’t get out of it,” Stephens says.

Anderson notes that the buyer tends to have more options to terminate the deal throughout the contract period than the seller, as the contract typically includes easy exit points for the buyer if adequate financing is no longer available or costs become greater than the buyer is willing to take on.

But for the seller, backing out of a deal too late in the game can be considered breach of contract, Stephens says. “If you have a third party involved, you have a buyer involved and you have a contract, [the seller is] committed to that buyer,” she says. “The contract is binding, so the buyer can always decide to sue the seller if they decide not to move forward.”

Stephens also points out that in the District of Columbia and other places in the U.S., a real estate agent’s duty is fulfilled when he or she has found a willing and able buyer to purchase the property. If your agent meets that responsibility and you choose to break the deal, you could also find yourself having to pay commission for a property you didn’t sell.

Updated on Jan. 18, 2019: This story was previously published on Feb. 23, 2017, and has been updated with new information.

Tags: real estate, housing market, existing home sales, pending home sales, home prices, mortgages


Devon Thorsby is the Real Estate editor at U.S. News & World Report, where she writes consumer-focused articles about the homebuying and selling process, home improvement, tenant rights and the state of the housing market.

She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.

Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at dthorsby@usnews.com.

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