Your Buyer Backed Out While You're Buying the Next Home What Now?

Call your attorney the same day, because the deadlines in your purchase contract are still running, then sit down with your lender to see whether the purchase can go ahead without the sale, and get your home back on the market at the right price. Most of the damage from a failed sale comes from the days lost afterward, not from the buyer who left.

I'm Dennis Mark Interdonato with The Dennis Mark Group at Keller Williams Realty Ocean Living. When you're selling one home in Monmouth or Ocean County and buying the next, a buyer walking away feels like the floor dropped out. It happens, and it's why every plan I write with sellers who are also buying includes the what-ifs. Here's the order to handle it in.

When did the buyer back out, and why?

The timing changes what comes next.

• During attorney review. Under N.J.A.C. 11:5-6.2, home sale contracts prepared by real estate licensees become legally binding at the end of a three-business-day review period unless an attorney for the buyer or the seller disapproves. A disapproval inside that window ends the contract. Here's how attorney review works.
• Under a condition in the contract. If the contract gave the buyer a condition, such as an inspection or getting a mortgage, whether they could walk away depends on its exact wording and deadlines.
• After everything was firm. If the buyer had no right left to cancel, your attorney tells you what your options are.

What happens to the buyer's deposit depends on the contract and the reason the buyer left. That's your attorney's call, not something to settle by text message.

What happens to the home you're buying?

Pull out your purchase contract and answer three questions with your attorney and lender:

1. Does your purchase depend on your sale? If the contract made your purchase conditional on selling, its terms and deadlines decide your options.
2. Can you close without the sale proceeds? Your lender tells you whether you qualify carrying both homes, or with other financing.
3. Does the seller of the next home need to hear from you? If you need more time, any change to the closing date has to be agreed in writing, through the attorneys.

Don't sit on it. A seller who hears about a problem early has room to work with you. A seller who hears about it the week of closing usually doesn't.

How fast should your home go back on the market?

As fast as you can do it right. The first two weeks on the market set the price, and a relaunch is a second first impression. Before it goes back up:

• Re-check the price. Look at what sold and what went under contract while yours was off the market. Start with an updated home value.
• Go back to the other buyers. If there were other offers or serious showings the first time, we contact them first.
• Fix the reason, if there was one. If the buyer left over something in the house, deal with it before the next buyer finds it.

Do you have to tell the next buyer what the inspection found?

If it's a material defect you now know about, expect to. The Division of Consumer Affairs' instructions for New Jersey's seller disclosure statement say the seller "is under an obligation to disclose any known material defects in the property even if not addressed in this printed form," and the statement describes the property as of the date on it. Under N.J.A.C. 11:5-6.4, real estate licensees also have to disclose information material to a property's physical condition that they know. Talk to your attorney about updating your disclosure.

This is where a builder's read pays off. I'm a former New Jersey home builder and residential remodeler, so I'll look at what the inspector flagged and tell you whether to fix it, offer a credit, or price it in, with the numbers for each. Here's how New Jersey's disclosure rules work.

What if your moving dates are already set?

Plan for it before you need it. Depending on the dates, a short-term rental, storage, a later closing on the purchase or a rent-back on your next sale can cover a gap. Here's how a seller rent-back works in New Jersey.

When a closing goes sideways, I don't leave people standing in the driveway. One client's purchase hit a snag on closing day, after the truck was already loaded. I set them up with temporary lodging near the new house for a few days while it was corrected. I got a guy for everything, and sometimes that guy is a place to sleep.

How do you keep it from happening twice?

• Vet the next buyer harder. A pre-approval confirmed with the buyer's lender, and for cash, real proof of funds.
• Know the house before they do. A walk-through with a builder's eye, from the roof to the mechanicals, before the relaunch.
• Write a calendar with cushion. Your sale closes first or on the same day as your purchase, with a few days of room where you can get them. Here's how back-to-back closings work.

How I plan around a change like this is on my life events page, and the Life Events Guide lays out the order of operations.

Frequently Asked Questions

Can a buyer back out of a home sale contract in New Jersey?

During attorney review, an attorney for either side can disapprove the contract within three business days. After that, it depends on the conditions written into the contract and their deadlines.

Who keeps the deposit if the buyer backs out?

It depends on the contract and why the buyer left. Your attorney advises on the deposit.

Can I still buy the next house if my sale falls through?

Possibly. It depends on whether your purchase was conditional on your sale and whether your lender approves you without the sale proceeds. Talk to both your attorney and your lender the same day.

Do I have to tell the next buyer what the last inspection found?

New Jersey's disclosure instructions say known material defects must be disclosed even if the form doesn't ask. Talk to your attorney about updating your disclosure statement.

This is general information, not legal, tax or lending advice. Your contracts and your attorney's advice control.

About the author

Dennis Mark Interdonato is a REALTOR® and Master CDRE® who leads The Dennis Mark Group at Keller Williams Realty Ocean Living in Point Pleasant, NJ, helping buyers and sellers throughout New Jersey make their next move, with Monmouth and Ocean County as home base. Read more about Dennis Mark.

Keep reading

• Selling your first home to buy a bigger one
• Selling and buying at the same time in New Jersey
• Have a question this didn't answer? Send it to Dennis Mark and it may become the next article.