That said, there's always a remote possibility that your buyer might be willing to back out if he/she/they know your predicament. Not likely, but at least worth exploring. Or perhaps they'd extend the escrow slightly or agree to let you rent back for a short period of time after escrow closes while continuing to look for a replacement home. At this point, those may not be that likely either, but again, they're worth exploring. If the buyer were to agree to cancel the escrow, at the very least, I'm sure they'd want to be reimbursed for the cost of their inspections, appraisal, etc.
Practically speaking, though, I wouldn't count on the buyer's cooperation. They're liable to be very upset if you talk about canceling and will probably insist that escrow close on time, as the contract provides. If you balk at signing closing papers or were to otherwise prevent escrow from closing, you'd be breaching the contract and the buyers could take you to court and sue for specific performance, asking the judge to enforce the contract.
These types of predicaments are unfortunate, but they do occur from time to time. When they do, it always has me scratching my head wondering why these possibilities weren't addressed up-front during contract negotiations.
If things aren't well-received by the buyer, I'd recommend consulting with a good real estate lawyer to explore your options.
Sorry to hear about your situation...I wish you the best of luck.
You could cause yourself a lot of legal trouble if you try to cancel right now. One good thing, though... you said the buyer has just completed their inspections. Most buyers will ask for credits or repairs. You are in a great position to say no to everything they ask, while still performing under your contract. If you say no to everything, and refuse to give credits, repairs, or a price reduction, there is always the chance they might get frustrated and cancel on their own. There is also a chance the house might appraise for less than the sale price. In fact, this is happening a lot recently as banks try to protect themselves. If this happens you can also refuse to reduce the price. Talk to a good real estate attorney about this, but your best bet may be to sit back and see if the buyer asks for anything.
I want to be clear that the following IS NOT ADVICE, but rather, a review of your situation as I understand it and what I might consider in the same situation. I will be assuming this is not a distressed sale and when escrow closes I will have sufficient equity at my disposal to support my future actions I comment on.
Although I do not like to rely on Median pricing for clues on purchase timing (prefer the Comparative Market Analysis), in this case itâ€™s useful to share my thoughts. As of 3/08, Placentiaâ€™s Median price for housing was $600K. As of mid January 09, this now sits at $490K, a shift of $110K. With the current state of the US economy, and a CA Unemployment Rate now at 9.3%%, the safe bet would be that pricing will further be depressed during the course of this year.
Loan Resets will also certainly add more supply:
http://docs.Steven-Anthony.com/Resets.pdf (show loan reset schedule)
http://docs.Steven-Anthony.com/OptionArmResets.pdf (shows accelerated option ARM reset schedule)
This is the type of information that might influence a buyer to think twice about buying right now!
A strategy I might employ under these circumstances would be one where I move forward and sell my home (exiting a depreciating asset) and then lease for 6 mos. to a year while I look for a new home. Depending on how steep the further trend on home prices dips, the total of any lease payments would likely be less than the hit I would take from a further reduced sales price by staying in my home until I find the "perfect home." As pricing further reduces, new properties that were once out of my price range should come into view and I can pick from the best that I see.
I would certainly not move forward with such a strategy without the help of professional to guide me (CFP, Tax, RE Lawyer, RE Agent, Mortgage Broker).
Best Regards, Steve
Just my $0.02