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When you sign a real estate purchase and sale agreement in Massachusetts, it creates legally binding obligations for both the buyer and the seller. Buyers often ask how they can get out of a deal, but sellers may also wonder whether they can cancel a contract once it has been signed. The answer depends on the specific terms of the agreement and whether certain legal grounds exist.
Understanding the Binding Nature of Real Estate Contracts
A real estate contract is more than a handshake—it is a written agreement that lays out each party’s rights and responsibilities. Once signed, both parties are generally expected to follow through. If a seller backs out without valid grounds, they may face significant consequences, including lawsuits for breach of contract or being forced to complete the sale through a court order.
Legal Grounds for a Seller to Cancel a Contract
Although sellers cannot simply change their minds once the contract is signed, there are certain situations where cancellation may be permitted.
1. Buyer Breach of Contract
If the buyer fails to meet their obligations, the seller may have the right to terminate the contract. Examples include:
- Not making required deposits on time.
- Failing to secure financing by the agreed deadline.
- Ignoring inspection timelines or failing to move forward in good faith.
When the buyer breaches, the seller may be able to keep the buyer’s earnest money deposit and walk away from the deal.
2. Contingencies in the Agreement
Most real estate contracts contain contingency clauses. These conditions must be met for the contract to move forward. If a contingency is not satisfied, either party may be able to terminate. For sellers, relevant contingencies may include:
- Right to find suitable housing: Some agreements allow the seller to cancel if they cannot secure a new home within a certain timeframe.
- Title issues: If there are unresolved liens or defects in the title that cannot be cleared, the seller may cancel the agreement.
3. Mutual Agreement to Terminate
Sometimes, both the buyer and seller agree that the deal should not go forward. If this happens, they can sign a termination agreement, which releases both sides from further obligations.
4. Legal or Practical Impossibility
In rare cases, unforeseen events may make it impossible for the seller to complete the sale. For example, if the property is damaged or destroyed before closing, the seller may have legal grounds to terminate the contract.
Risks of Wrongful Termination
If a seller attempts to back out without valid legal grounds, they risk serious consequences, including:
- Breach of contract lawsuits: The buyer can sue for damages, such as the cost of temporary housing or lost opportunities.
- Specific performance orders: A Massachusetts court could require the seller to go through with the sale.
- Damage to reputation: Word spreads quickly in the real estate market, and wrongful termination could affect future dealings.
Protecting Yourself as a Seller
If you are considering terminating a real estate contract, it is important to review the agreement carefully. Pay close attention to:
- Contingency clauses and their deadlines.
- Buyer obligations and whether they have been met.
- Any provisions that give the seller an out under specific circumstances.
Do not rely on assumptions. Even if you think the buyer will not pursue legal action, Massachusetts law strongly protects buyers once a contract is signed.
When to Seek Legal Guidance
Terminating a real estate contract is not something a seller should attempt without professional advice. Every situation is unique, and the wording of your agreement matters. An attorney who understands Massachusetts real estate law can help you determine whether termination is legally possible and what risks you may face if you move forward.
What This Means for Your Real Estate Sale
While there are limited circumstances under which a seller can terminate a real estate contract, Massachusetts law makes it clear that contracts are generally binding. Unless the buyer breaches, a contingency is not met, or both parties agree to walk away, sellers who try to back out may face lawsuits or court orders forcing them to sell.
At LaFountain & Wollman, P.C., we help property owners review their agreements, understand their rights, and protect their interests throughout the real estate process. If you are considering cancelling a contract, contact us to discuss your options before making a move.