Legal Options When a Buyer Backs Out After Signing the Purchase Agreement
When a buyer backs out after signing a purchase agreement, sellers are often left facing frustration, financial loss, and uncertainty about what to do next. Real estate transactions involve substantial time, money, and preparation, and it can feel overwhelming when an anticipated closing suddenly falls apart.
Understanding your legal rights and available remedies is the first step toward moving forward with confidence.
At the Law Offices of Peter V Lathouris LLC, our Stamford, CT real estate law attorney has guided countless clients through these difficult situations, helping them recover losses and protect their property rights under real estate law. Our firm takes a detailed, practical approach to evaluating contracts, identifying breaches, and determining the most effective way to resolve disputes.
We serve clients throughout Fairfield County and New Haven County, including Darien, Greenwich, Norwalk, Danbury, and Westport. Whether that involves negotiation, mediation, or legal action, we work closely with sellers to make sure their interests are represented at every stage of the process. Contact us today to schedule a consultation.
The Binding Nature of a Purchase Agreement
A purchase agreement is far more than a handshake or verbal commitment—it’s a legally enforceable contract. Once both sides sign, they agree to fulfill specific obligations related to price, timelines, financing, inspections, and closing conditions.
When the buyer later refuses to proceed, the agreement’s provisions come into play. The contract usually outlines:
Deposit terms – how earnest money is held and under what conditions it may be forfeited or returned
Contingencies – such as financing, appraisal, or inspection clauses that must be satisfied before closing
Deadlines – including closing dates, document submissions, and financing milestones
If none of the listed contingencies apply and the buyer still walks away, that withdrawal may constitute a breach. Under real estate law, sellers have multiple remedies depending on the contract language and state statutes.
Common Reasons Buyers Withdraw
Understanding why buyers change their minds helps determine whether they acted within their rights. Some withdrawals are legitimate under contract contingencies, while others amount to default.
Legitimate reasons may include:
Failed financing – The buyer’s loan was denied, often activating a financing contingency.
Low appraisal – The property appraised below the sale price, and the buyer opted not to make up the difference.
Inspection issues – The home inspection revealed structural or safety problems that the seller refused to repair.
Title concerns – Clouds on the title or unresolved liens made the purchase legally risky.
Improper reasons may include:
Cold feet – The buyer simply changed their mind about purchasing.
Better opportunity – Another property became available.
Financial hesitation – Concerns about future market shifts or personal expenses.
If the withdrawal stems from a reason not protected by the contract, we can analyze whether the seller has grounds to recover damages or compel performance.
First Steps After a Buyer Backs Out
When a buyer defaults, taking prompt and measured action is essential. Our firm advises clients to start with documentation and communication before deciding whether litigation or negotiation is appropriate.
Key steps include:
Review the purchase agreement: Confirm what contingencies exist and whether deadlines were met.
Document communications: Keep copies of texts, emails, and correspondence with the buyer or their agent.
Notify the escrow agent: Ask that earnest money remain frozen until legal rights are clarified.
Consult with a lawyer: Early legal review under real estate law can help identify whether a breach has occurred.
Mitigate losses: Consider re-listing the property promptly while reserving the right to recover damages later.
By following these steps, sellers strengthen their position in any future claim or negotiation.
Legal Remedies for Sellers
When a buyer breaches the agreement without justification, several remedies may be available. The appropriate choice depends on the contract’s terms, the seller’s goals, and the financial scope of the loss.
Retaining Earnest Money
Most contracts include an earnest-money deposit as proof of the buyer’s commitment. If the buyer defaults, the seller may be entitled to keep this deposit as liquidated damages. Retaining the earnest money is often the fastest and least contentious solution.
However, disputes sometimes arise over who’s entitled to those funds. The escrow agent typically can’t release them without written consent from both parties or a court order, so our firm often intervenes to negotiate or, if necessary, litigate release.
Pursuing Compensatory Damages
If keeping the earnest money doesn’t cover the loss, sellers can pursue additional damages through civil court. These may include:
Carrying costs – Mortgage payments, taxes, and utilities accrued while the home remains unsold
Price difference – The gap between the original agreed-upon price and what the home ultimately sells for
Additional marketing expenses – Realtor fees or advertising costs to re-list the property
Incidental expenses – Appraisals, staging, and legal costs related to the failed sale
Through real estate law, we help clients calculate accurate damages to seek compensation.
Filing a Lawsuit for Specific Performance
In certain cases, a seller may ask the court to compel the buyer to go through with the purchase. This is known as specific performance, where monetary damages aren’t sufficient because the property is unique.
Specific performance cases are more common in high-value or unique real estate transactions, such as custom homes or investment properties. Courts review whether the contract was valid, whether the seller fulfilled their obligations, and whether enforcing the sale is fair under the circumstances.
Negotiation and Mediation Before Litigation
While litigation can be effective, it’s often costly and time-consuming. Before heading to court, we frequently pursue negotiation or mediation to resolve disputes efficiently.
Negotiation options may include:
Reinstating the deal. Sometimes buyers reconsider once misunderstandings are clarified.
Extending deadlines. Adjusting timelines for financing or closing may salvage the agreement.
Partial forfeiture. The parties may agree that the buyer forfeits part of the deposit in exchange for release.
Mediation offers other advantages:
Confidentiality – The proceedings are private, which helps preserve reputations.
Flexibility – Creative solutions can be reached that courts might not authorize.
Reduced cost – It’s generally less expensive and quicker than litigation.
By combining negotiation with a sound understanding of real estate law, our firm helps clients find solutions that save time and maintain goodwill whenever possible.
Factors That Influence Legal Strategy
Each situation has its own variables. Our approach depends on details such as the type of property, market conditions, and the buyer’s reasons for withdrawing.
Key considerations include:
Strength of contingencies: If contingencies were satisfied and deadlines passed, the seller’s position strengthens.
Buyer’s financial status: Collecting damages may be impractical if the buyer lacks assets.
Market volatility: Rapid market changes can affect the calculation of lost profits.
Timing of withdrawal: Backing out days before closing may cause greater damage than an early withdrawal.
These factors influence whether to seek damages, pursue specific performance, or accept a negotiated settlement. We tailor our advice to each client’s goals and tolerance for risk.
The Importance of Proper Contract Drafting
Many disputes arise because of vague or poorly drafted purchase agreements. When sellers engage us early, we review and craft contracts designed to reduce future misunderstandings.
A strong agreement should:
Clearly outline contingencies: Financing, inspections, and appraisals must be described in specific terms.
Define earnest-money rules: The contract should state who holds the funds, release procedures, and forfeiture conditions.
Specify performance deadlines: Clear dates prevent ambiguity when one party delays.
Include dispute-resolution clauses: Arbitration or mediation provisions can control costs if a disagreement arises.
Proper drafting provides a protective foundation under real estate law, minimizing uncertainty for both sides and making enforcement easier if things go wrong.
Contact Our Firm Today
If a buyer has backed out after signing your purchase agreement, you don’t have to face the situation alone. The Law Offices of Peter V Lathouris LLC is ready to review your contract, explain your rights, and guide you through every legal option available under real estate law.
We serve clients in Stamford, Connecticut, and throughout Fairfield County and New Haven County, including Darien, Greenwich, Norwalk, Danbury, and Westport. Reach out to schedule a consultation with an experienced real estate attorney and protect your property interests today.