Below is a section from the California Association of Realtors Purchase Agreement which covers the seller's right to cancel. Please consult with a real estate attorney to better understand your rights and to obtain legal advice.
C. SELLER RIGHT TO CANCEL:
(1) Seller right to Cancel; Buyer Contingencies: If, within time specified in this Agreement,
Buyer does not, in writing, Deliver to Seller a removal of the applicable contingency or
cancellation of this Agreement then Seller, after first Delivering to Buyer a Notice to Buyer to
Perform (C.A.R. Form NBP) may cancel this Agreement. In such event, Seller shall authorize retum of
(2) Seller right to Cancel; Buyer Contract Obligations: Seller, after first Delivering to Buyer a
NBP may cancel this Agreement for any of the following reasons: (i) if Buyer fails to deposit funds
as required by 3A or 3B; (ii) if the funds deposited pursuant to 3A or 3B are not good when
deposited; (iii) if Buyer fails to Deliver a notice of FHA or VA costs or terms as required by
3C(3) (C.A.R. Form FVA); (iv) if Buyer fails to Deliver a letter as required by 3H; (v) if Buyer
fails to Deliver verification as required by 3G or 3J; (vi) if Seller reasonably disapproves of the
verification provided by 3G or 3J; (vii) if Buyer fails to return Statutory and Lead Disclosures as
required by paragraph 6A(2); or (viii) if Buyer fails to sign or initial a separate liquidated
damage form for an increased deposit as required by paragraphs 3B and 25. In such event, Seller
shall authorize retum of Buyer's deposit.
(3) Notice To Buyer To Perform: The NBP shall: (i) be in writing; (ii) be signed by Seller; and
(iii) give Buyer at least 2 (or D ) Days After Delivery (or until the time specified in
the applicable paragraph, whichever occurs last) to take the applicable action. A NBP may not be
Delivered any earlier than 2 Days Prior to the expiration of the applicable time for Buyer to
remove a contingency or cancel this Agreement or meet an obligation specified in 14C(2).
You are under contract to sell your property. You are bound by your contract unless the Buyer backs out or allows you to back out.
Your best bet, as advised bellow, is to open a dialogue immediately, the Buyer may allow you to back out. They may ask for a penalty payment in compensation.
However, you still owe a commission to your agent, they have complied with their contract with you and they have produced a Buyer. They in turn owe a commission to the Selling agent, per their contract. They too may allow you to back out, but your Agent has expended a lot of time and money to produce this Buyer. It is unlikely they will let you out without some payment.
The Escrow company may be owed money as well.
Contractually speaking, no you can't back out of the deal unless the buyer fails to perform on some aspect of the contract. Have they given their deposit to the escrow company yet? I would talk to the parties involved starting with your realtor and explain that you want to cancel the transaction, and why. There is a chance that the buyers may mutually agree to cancel if you have a good reason for wanting to do so.
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Until contingencies will be removed, you don't owe commission, unless it says in the listing agreement that you will pay for expenses or other items to compensate, in case you cancel the listing.