When does a Home Sales Contract become Binding?

A home sales contract is binding when it has been signed by both the buyer and seller. At that point, both parties must fulfill the terms of the contract or be subject to lawsuit from the other party.

Buyer Backs Out

If you, as a seller, have held up your end of the contract on all terms and conditions, the buyer must do the same. If a buyer is unable to move forward with a purchase, the buyer has a chance to show that certain terms of the contract were not satisfactory. As the seller, you can sue the buyer for full execution of the contract. You can permit a buyer to back out, but you will keep the earnest money.

Seller Backs Out

If you are buying a home, the seller is obligated to the contract once it has been signed by both parties. A seller cannot back out unless you fail to complete your end of the deal. In some cases, a seller may offer to give you all earnest money back in return for canceling the contract. You do not have to accept this offer. You have a right to legally sue the seller in order to take over title of the property.

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