The short answer
Only on the grounds the contract itself gives them, which are few: a contingency written for the seller, the buyer failing to perform on a deadline, or the parties agreeing to cancel; a seller who simply changes their mind is in breach, and the buyer can sue for the deposit back, for damages, or to force the sale.
A signed purchase agreement binds both sides, and almost every contingency in a standard form protects the buyer. Sellers who want out therefore have less room than buyers, and the room they have is in the contract's own clauses and dates. Here is where it is, and what backing out without it costs.
The legitimate exits
- A seller contingency written into the contract: most often finding a replacement home by a date, or a court or estate approval in a probate sale.
- The buyer's failure to perform: missing the deposit, the loan approval date or the closing date, or refusing to remove a contingency when the deadline arrives. The contract's notice-to-perform procedure has to be followed exactly.
- The buyer asking for something the seller may refuse: repairs after inspection, a price reduction after a low appraisal. Refusing is not backing out, but the buyer may then cancel under their own contingency.
- Mutual cancellation: both sides sign a release, usually with the deposit returned to the buyer.
- The attorney review period, in the states that have one (New Jersey, for instance), during which either side can cancel.
What breaching costs
A buyer whose seller refuses to close can sue for specific performance, which is a court order to complete the sale, and courts grant it for real estate because each property is treated as unique. Or they can sue for damages: their out-of-pocket costs (inspection, appraisal, rate lock, temporary housing) and sometimes the difference between the contract price and what they later paid elsewhere. The buyer's agent may also claim the commission from the seller. Where the contract has a liquidated damages clause it usually binds the buyer, not the seller.
In practice most seller breaches end in a negotiated settlement: the seller pays the buyer's costs and something for the trouble, and the buyer releases the contract. It is cheaper than a lawsuit and it is still real money.
If you are the seller who wants out
Read the contract for a contingency you hold and a date the buyer has missed, and talk to the buyer before doing anything else; buyers whose circumstances have also shifted sometimes agree to cancel for the return of their deposit. Do not stop cooperating with the escrow to run the clock out, which is itself a breach. And if the reason is a higher offer, weigh what you would clear against the costs above; the higher offer is rarely worth the difference.
Questions people ask
What happens if a seller backs out of a contract?
The buyer gets the deposit back and can sue for their costs, for the difference in price of a replacement home, or for an order forcing the sale. Most cases settle with the seller paying the buyer's costs.
Can a seller back out if the appraisal is low?
No. A low appraisal is the buyer's problem and the buyer's contingency. The seller may refuse to lower the price, and the buyer may then cancel, but the seller cannot cancel because of it.
Can a seller accept a higher offer after signing a contract?
Only as a backup offer that takes effect if the first contract falls through. Cancelling the first contract to take the second is a breach, and the first buyer can sue for the difference.