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3 Options For A Buyer When A Seller Backs Out of Escrow

Little is more frustrating for a buyer than having a seller of real property attempt to back out of a purchase and sale agreement after escrow has opened.  Typically, the buyer has spent hours searching for the perfect property, submitting multiple offers and time negotiating the terms of the purchase agreement that they had thought was finalized.  If the seller attempts to back out once escrow has commenced, without a valid basis for doing so, then the buyer has at least 3 options:

1.  Demand the seller comply with the terms of the contract.  In California, most residential purchase and sale agreements are drafted using the California Association of Realtor’s form.  This form usually requires that the buyer and seller participate in pre-lawsuit or pre-arbitration mediation before filing their claim to preserve their respective right to recover prevailing party attorneys’ fees and costs in the event they prevail in the lawsuit.  Any demand letter should include a demand for mediation.

2.  File a lawsuit for specific performance.  Despite item 1 above, if the buyer fears that the seller may be attempting to sell the property to someone else, the buyer can file a lawsuit for the purpose of recording a lis pendens (notice of pendency of action).  The lis pendens clouds title to the property and makes is so that no new buyer would be willing to purchase the property.

3.  Walk Away.   If the seller is willing to give the buyer the deposit back, then some buyers decide to move on.  While this is not required, if a buyer was hesitant about the property this can be a second chance for the buyer to back out of the purchase and sale.

We generally recommend options 1 and 2.  It is typically very hard for a seller to cancel escrow without any valid reason for doing so.  A change of mind is not acceptable.  A good real estate attorney will be able to help the buyer push the sale through with aid from the court if need be.  We have experience with these matters, and have a track record of getting our attorneys’ fees paid from the unwilling seller too.

If you need help with your seller backing out of escrow, contact our Los Angeles real estate attorneys by calling us at (310) 954-1877 , sending us an email at info@schorr-law.com, or by filling out the contact form on the side of the page.

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