Can a seller sue the buyer for backing out of the house purchase?
That depends on why they are backing out. Let me put it this way. If the home buying process went as planned, for instance; the appraisal was satisfactory, the home inspection had no problems and the lender has approved the loan. Now, for one reason or another the buyer just woke up one day (or possibly found another home) and decided NOT to go through with the purchase, then yes, the seller can sue the buyer for what is called " Specific Performance". This action does not happen very often in the market that I work in.
However, it does happen. The few that I've seen though, were resolved like this. Keep in mind that the seller has probably realized some expenses, such as; repairs that were required by the buyer to complete the home purchase, Title/escrow research, maybe even expences on the new home that they are planning on purchasing, like an appraisal and such, let alone the fact that the home was off the market for other potential buyers to look at. There is no doubt that the seller has damages. In cases like this, I've seen the buyers write a very sizable check to settle out of court.
If this issue can not be resolved between the parties, then a judge will. Remember that the offer to purchase becomes a legal and binding agreement once the buyer and seller sign and deliver this document. If all provisions of this document have been performed, the judge will find in favor of the seller and force that buyer to purchase the property.
If this question is posed by the buyer of a property, seek legal advise.
I agree with Ken. Yes, you can sue for specific performance. In California disputes over real estate contracts must be mediated first. Then other legal remedies such as arbitration or the courts can be utilized. The first question is "Why is the buyer backing out" The next should be "Have they cancelled the agreement within the time frame called for in the contract?" Another question should be " Is their reason for backing out justifiable withhin the context of the mutually written contract?" I always like to ask if you as the seller have lived up to your end of the agreement. Have you fully and honestly disclosed all known defects regarding the property, the neighborhood, the taxes, future development, past or pending litigation, etc?
Once you have satisfactory answers to those questions I would proceed carefully. Have you discussed the situation with your broker if one is being used? Does your contract call for mediation or arbitration as opposed to the courts? If the buyer has breached the contract you would certainly be entitled to damages. I advise you to seek counsel from a qualified attorney who specializes in real estate contracts.