There could be multiple reasons why a seller may cancel the deal. However, legally, they can do so only under certain circumstances after signing the agreement, which primarily revolve around missed deadlines or mutual releases.
When can a seller terminate the agreement?
A seller should follow the terms and conditions of the purchase agreement to the letter. They cannot cancel the deal on a whim. Common circumstances that may allow a seller to lawfully terminate the agreement include the following:
- You failed to meet a contractual obligation – such as removing a financing or home inspection contingency – by the required deadline and you did not cure the failure after receiving a Notice to Buyer to Perform (NBP).
- You and the seller both signed a mutual release to cancel the purchase contract and escrow.
- The seller had a contingency clause within the agreement, such as the seller’s successful purchase of a replacement home, that allowed them to cancel the deal if certain conditions were not met
Outside of these circumstances, a seller who withdraws from the deal may be in breach of the contract.
What should you do if your seller is backing out without legal grounds?
You have fulfilled all the contractual obligations and have removed the contingencies. On the closing day, you get a call from your real estate agent saying that the seller is refusing to complete the deal. In a situation like this, you may send them a Demand to Close Escrow (DCE). This formally notifies the seller that they have to close the deal as agreed.
If they refuse to finalize the sale, you must generally offer to mediate to preserve your right to attorney’s fees; however, a real estate attorney may recommend concurrently filing a lawsuit and recording a Lis Pendens on the property to legally prevent the seller from selling it to someone else while the dispute is resolved.
Protect your California buyer rights
When a California home seller breaches a purchase agreement, time and clear documentation are your strongest leverage. By retaining a real estate attorney, you may be better positioned to pursue legal remedies.