It doesn’t happen very often, but occasionally a home seller will decide that they don’t really want to sell their home after all.
What can they do?
If your home is only listed for sale and there isn’t a pending offer, then you can cancel your listing agreement. Maybe. It depends on the brokerage you have listed your home with and how your listing agreement is written.
Thompson’s Realty will let a home seller cancel their listing agreement with no strings attached. We realize that sometimes situations change. Be advised, not all brokerages will let you cancel a listing agreement. You should be able to at least take your home off the market. Check your listing agreement. Some brokerages may charge you for expenses they have incurred to market your home. Your options should be spelled out in your listing agreement. Read it carefully…
What if my home is under contract for purchase?
Well, you’ve got a problem. The purchase contract you signed is a legally binding agreement to sell your property under the terms of the contract. Breaking such a contract is generally considered a breach of contract:
Breach of contract n. failing to perform any term of a contract, written or oral, without a legitimate legal excuse … Breach of contract is one of the most common causes of law suits for damages and/or court-ordered “specific performance” of the contract.
Ugh. Law suits for damages. Court orders. Sounds expensive, and it is.
What is the home buyers recourse if you breach your contract and decide not to sell your home?
Typically the home buyer will seek court-ordered relief in the form of “specific performance”. In short, they take you to court and ask the judge to force you to uphold your end of the deal. And the vast majority of the time, they will get exactly that. Should you fail to sell the home after the judge tells you to, well now you are looking at contempt of court charges and all the fun and expense that entails. In this case, you might not need your home anyway as you may well have a new place to stay in The Big House.
What exactly is “Specific Performance”?
From the law.com dictionary:
Specific performance n. the right of a party to a contract to demand that the defendant (the party who it is claimed breached the contract) be ordered in the judgment to perform the contract. Specific performance may be ordered instead of (or in addition to) a judgment for money if the contract can still be performed and money cannot sufficiently reward the plaintiff.
Here is a great article, written by an attorney, with more information on specific performance.
The vast majority of the time, a seller being sued for specific performance is going to lose. After all, you entered into a contractual agreement to sell your home. The buyer has more than likely paid out of their own pocket for inspections, an appraisal, and possibly some mortgage fees. In addition, they may have sold their own home, or arranged to terminate their lease. Not to mention that they stopped looking for a home because you promised to sell them yours. Your real estate agent or the buyer’s agent might even be able to come after you for commissions due since they procured a willing, able and ready buyer for your home.
Occasionally a seller might win a specific cause complaint, but typically that only happens if the seller can’t sell the home. Not because they don’t want to, but because they can’t — as in they no longer can convey clear title.
Any other options?
You could always try asking the buyer if they would agree to a mutual cancellation of the purchase contract. It’s pretty unlikely that will fly because, as previously mentioned, the buyer already has significant monetary “skin in the game”. Maybe if you agree to reimburse them for their costs, and maybe if they are getting cold feet and/or are the nicest people on the planet then they might agree to a mutual cancellation. In the current Phoenix real estate market where many buyers have submitted offers on multiple homes, only to have their hopes and dreams dashed by being outbid, I think that it is pretty unlikely that a home buyer under contract is going to say, “No problem. I’ll just go back to the stress and pressure of finding another home”.
If you do manage to get a buyer to agree to a mutual cancellation, I would strongly suggest having an attorney draft the cancellation agreement so that you are ensured the buyer can’t come back later and sue for specific performance anyway.
In short…
If you are a seller looking for a way out of selling your home, you need to speak to an attorney. Breach of contract can have serious legal and financial implications. Don’t screw around with it. Your agent probably isn’t an attorney. Seek your agent’s advice (which should be, “speak to an attorney…”). If your agent says, “Eh, no big deal, happens all the time!” then… well, good luck. You’re going to need it (and a healthy checking account balance as well).
Disclosure: I am not an attorney, in any way shape form or fashion. And an attorney is exactly who you need to be speaking to if you’re considering breaching your home sale purchase agreement. The above is based on my professional experience. Laws and real estate purchase contracts vary by state and possibly city. Get off the Internet now and find an attorney if you are considering breaching a contract.
Photo Credit: By controlarms on Flickr. CC Licensed.
The Phoenix Real Estate Guy was started by Jay Thompson, and I have a little blogging problem... he liked to say...
Great blog, Jay. I was just wondering this as I referred a friend of mine to a fine agent and now after it looks like she doesn’t want to even move, I regret referring her to that agent.
Jay: Many seller’s mistakenly believe that since the buyer typically has “outs” in a real estate purchase agreement, that they, too, should have the ability to simply cancel the deal if they change their mind. Here in Colorado at least, the seller’s decision to sell their home normally has to be made before they sign the purchase agreement; after that, it can be difficult and expensive (and maybe even impossible, as you point out), for them to change their mind. As always, the advice to get an attorney is right on point, good post.
In the spring of 2005 when the median Phoenix home price was going up $10,000 a month I got a call from a woman who had signed a contract to sell her home to an investor who had just knocked on her door. She did not have an agent or lawyer.
She said the contract she signed gave the buyer a 90-day (!) inspection period which she thought was normal, and some other funkiness. She now wanted to cancel. I said she may not be able to cancel and she needed a lawyer for sure. And like Phil Boren mentioned above, she said “But when I bought the home my Realtor said I had a chance to cancel the contract! The buyer says he won’t let me cancel and now he doesn’t return my phone calls. What a jerk! How do I cancel this contract?” The poor woman was completely clueless and, I think, being taken advantage of by the investor buyer.
On the other hand, she did save herself the cost of paying a real estate agent to get her home sold. (cough)
Unfortunately, too many people are always looking for ‘outs’, even if they made a conscientious decision to proceed with a specific course of action (whatever it may be). From a listing agent’s perspective, if a client asks to cancel their listing and are reasonable in their requests, I would let them go – no need to ‘tie’ an unwilling seller to a listing contract that will just result in stress and aggravation to all involved. Good post, Jay.
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Hi Jay,
Here in Spain are the agreements double deposit to the buyer from the seller if the seller drop out of the contract.
Thanks for the added information you have discuss, Great post!
Hi Jay,
Great post. Just last month I had a seller in Dana Point decide not to sell a few days before closing. I represented the buyer and no doubt they were in breach. Scenario gets more complicated with it being a short sale and the home will be foreclosed on and/or short sale lender approval lost long before any legal resolution. My buyer filed in small claims court simply to recover expenses associated with the sale. It was surprising how little recourse they had under this scenario!
Regards,
Dave
We just had this experience in Naples, FL but luckily it happened before the seller signed. Full price offer and then the seller decides not to sell – believes he’s selling “too cheap.” In this case there is nothing the buyer can do and nothing the Realtor can do – believe me I checked it out. There has to be a signed contract for any of the above to take place. Sellers can offer properties for sale in Florida for any amount and then not sell it to you – their choice.
Good nice share thank you..
I’ve never had a home seller cancel a listing agreement, but I can see how this might cause a lot of issues for some brokerages. I personally would willingly let the listing be terminated with no strings as most likely if this was the case, it wouldn’t be about what I wasn’t doing… But what they have decided not to do.
Sellers must pay realtors, on average, a 6% commission when the homesells. This can be very costly for people selling their homes. You’ve done all you can to prepare and show your home. Now you can sit back and watch the offers roll in, right? Great post, it’s informative content!
Nice ! great post ! thank you..
Very good post , great content.
All the above are valid responses. Simply put a contract is a contract that is legally binding unless there are agreed stipulations to it that cannot be met. Buyer or sellers remorse does not qualify.
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All the above are valid responses. Simply put a contract is a contract that is legally binding unless there are agreed stipulations to it that cannot be met. Buyer or sellers remorse does not qualify.
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Great post ! thanks for the valuable information..
very informative and useful post..
I include an appendix to all my listing contracts with an unconditional release if they ever want it. Only ever had 1 client use it.
Real estate purchase contracts to be in writing protects the public against scams and cheating in real estate dealings This contract must contain the same basic elements including common agreement, lawful objective and concern as other contracts in order to be enforceable.
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Real estate property tax information taken from the official property tax records for all residential and commercial properties and in India property tax or ‘house tax’ is a local tax on buildings. It looks like the US-type wealth tax and differs from the excise-type UK rate.
<a href=”http://www.mahimagroup.org/”>builders in jaipur</a>
Real estate property tax information taken from the official property tax records for all residential and commercial properties and in India property tax or ‘house tax’ is a local tax on buildings. It looks like the US-type wealth tax and differs from the excise-type UK rate.
Real estate property tax information taken from the official property tax records for all residential and commercial properties and in India property tax or ‘house tax’ is a local tax on buildings. It looks like the US-type wealth tax and differs from the excise-type UK rate.
Great post. I have never had to cancel a listing contract but If a client asked me to do so, i would.
This is really informative blog. It helps the home owners know the consequences when cancelling the contract. Thank you for sharing this.
Under contract means that the property has an agreement for sale and purchase. A buyer and seller have come to a meeting of the minds on the terms of the sale. It can wait under contract until it closes, which can be for any length of time decided upon by the buyer and seller.
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Under contract means that the property has an agreement for sale and purchase. A buyer and seller have come to a meeting of the minds on the terms of the sale. It can wait under contract until it closes, which can be for any length of time decided upon by the buyer and seller.
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