Updated on December 14, 2021
You have signed a contract to buy or sell a house. Once you have signed a contract, the parties enter into a phase of the buy or sell process called escrow. During this phase, the parties hire a neutral third party that holds the money in trust for both sides, which is the escrow company. Before the escrow company releases the buyer’s funds on the day the sale is completed, which is known as the closing, the escrow company will collect all of the necessary paperwork that is required to complete the transaction or will wait for the appropriate instructions of the buyer and the seller.
A key question is whether you can change your mind during escrow? Can a Seller Back Out of Escrow ? What if the buyer no longer wants to buy the house? What if the seller no longer wants to sell the house? Can you get out of your contract? Can Seller Back Out of Contract During Option Period?
This is where conditions put on the contract by the buyer or the seller (called “contingencies”) come in.
A purchase and sales contract will typically have a contingency clause that defines several terms that must be met for a real estate contract to become binding on the parties. If all the conditions are met, the parties who signed the contract have to go through with the deal. If the conditions are met and a party refuses to complete the sale, that party then risks creating a dispute with the other side that may require arbitration or litigation to resolve.
On the other hand, if the conditions are not met, there is a possibility that a party can back out on the contract. An explanation of the most common contingencies of a purchase and sales contract for a home will be helpful for understanding how this works.
During escrow, the buyer has a specific time period during which he must do the following (if these conditions are included in the purchase and sales contract):
If a contingency has not been met, then a party can probably be released based on the terms provided in the purchase and sales contract
For the buyer who wants to get out of a contract, a failure of any one of the contingencies may release the buyer from going through with the deal. For the seller, a failure of the buyer to complete the conditions within the specifically provided time may release the seller from the contract.
Our experienced real estate lawyer at Schorr Law has experience with buy-sell disputes for home and commercial sales and purchases. To see if you qualify for a free 30-minute consultation, you can contact our Los Angeles real estate attorney by calling us on phone at (310) 954-1877 or by email at email@example.com. You can also send us a text to (323) 487-7533, or send us a message through our easy to use Contact Us form.
By Valerie Li, Esq.