Canceling a real estate contract in New York entails following specific rules and obligations. Since you cannot cancel once you’ve completed the procedure and the buyer has signed, you must be careful before officially signing papers.
Hiring a real estate lawyer in NYC will help you get through the ordeal of selling a real estate site hassle-free, including if you decide to change your mind along the way and cancel it.
Aminov Law Group provides a simple guide on whether you can cancel a real estate contract as a seller and what consequences you may face below.
Closing a Real Estate Contract in NYC
Closing a real estate contract requires a few steps. Once the buyer makes an offer through their attorney, the real estate owner can accept or decline it. It’s also possible to make a counteroffer to modify some components, for example, a contingency.
The contract describes all expectations of both parties and offers protection in the purchase process. Once both parties are entirely satisfied with the conditions, they can sign, after which the document is binding.
Keep in mind that before signing anything, it is best to have your lawyer review the contract and agree on any changes since it determines the cancellation policy.
Also, whether or not a seller can cancel or back out of a real estate contract depends on how far along the process the parties involved have gone. We will address this in depth below.
Can a Seller Withdraw from a Real Estate Contract Before Closing It?
Before closing a real estate contract and signing it, the seller has no obligation to sell the property. During this period, the seller can back out anytime for any reason with no explanation.
Things get a bit more complicated once the contract is signed — something we will explore in the following section.
Can a Seller Cancel a Signed Real Estate Contract?
Real estate law generally favors the buyer — there are more articles protecting the buyer if they decide to cancel the contract. However, for the seller, it is not as easy.
A seller might change their mind for various reasons: a better offer, emotional attachment, or simply because they cannot find another place to live. If the homeowner decides to do so, the consequences might be financially demanding.
Still, there are few situations where a seller might successfully cancel a signed contract agreement without facing significant losses:
- Contingency of sale
If you are planning to sell your house and buy one at the same time, it is a must for the purchase agreement to include a contingency of the sale. This allows you to back out of the sale if you fail to buy another place to live without legal consequences. However, this is only possible if the contingency is part of the contract.
- The buyer fails to meet deadlines
The seller can state that the buyer must meet the contract requirements in a timely manner. If the buyer fails to fulfill the contract by the given deadline, the seller is allowed to cancel the contract.
- Change of circumstances
If different circumstances occur, such as an illness or the death of a family member, it may pressure you to change your moving plans. Try explaining to the buyer why you need to cancel the contract; they could be quite understanding. This is one way to avoid an expensive court case.
However, keep in mind that the buyer has incurred expenses during the closing process of the contract. Therefore, offer to compensate for all costs the buyer has had.
The Consequences of Canceling a Contract
It is difficult for the seller to back out without experiencing any consequences. Sellers often incur legal or monetary penalties. Depending on the circumstances and valid reasons for the cancellation of the contract, a few situations may arise:
- “Specific performance”
This is a legal term for forcing the seller to complete the transaction. The seller may choose to proceed in court, though the chances of winning that type of case are low. Another option is the buyer may decide to start a legal process against the seller. In this case, not only will the seller have to cover the buyer’s expenses for the loss of the home, but also compensate for the buyer’s court fees.
- Lis pendens on the property
After the contract has been closed, the buyer becomes the legal owner of the property. If the seller wants to back out of the deal, the buyer can file a lien (lis pendens) on the real estate. From here, it is illegal for the seller to sign a contract with anyone else.
- The listing agent can sue the seller
The listing agent has the right to file a lawsuit against the seller if they back out. This is because the seller also signs a listing agreement with their agent. The agent may also require the promised commission because they spent time working on the sale.
- No additional expenses
The buyer may agree not to buy the property and cancel the contract, in which case the Seller will not experience additional costs.
Aminov Law Group: Here to Help You!
A real estate lawyer in NYC will be of tremendous help when selling a property — from start to finish. Whenever a legal issue appears, you will be at greater peace of mind if you have an attorney by your side.
And there is no better place to find that attorney than with us. We are Aminov Law Group – a dedicated team of lawyers that specializes in the practice of real estate law. We will guide you through the legal process step by step and ensure you will not sign anything that goes against your best interests.
Book a consultation today with us — our team will be happy to help.