When a seller changes his mind about a sale and wants to cancel the escrow, how should an agent handle the situation?

His own agent is usually the first person that the seller turns to for advice first - even before an attorney. For one thing, the advice is free; it's part of the service his agent provides - that's what most buyers and sellers believe. Most don't realize they might be asking the agent to give legal advice. They expect the agents to be knowledgeable in all aspects of real estate transactions including legal issues. In my experience, many sellers rely heavily on their agents to help them resolve even their legal situations - at  least in the beginning of the crisis. 

As agents, you don't want to see any seller's remorse because this means you might lose your commission on the deal. You might be tempted to offer a solution - sometimes even a legal one - to your seller  in order to save the deal.

Depending on the reasons for the seller's morse, the agents may have a conflict of interest in this situation. For sure, the listing agent would have one because he probably has a signed listing agreement with the seller. (In California, an agreement to pay commission must meet the requirements of the statute of frauds). Depending on how the listing agreement is written, he may be entitled to recover commission from the seller when the seller improperly cancels the deal. Also the seller is at risk of paying damages to the buyers as well.

Most sellers don't recognize this conflict of interest and often divulge much confidential information to their own listing agents in hope of getting proper advice from their own agents. Something I've yet to understand, ignorant of this conflict of interest, most sellers and buyers trust their real estate agents more than their own attorneys.

Many agents that I know would try to be helpful in this situation, not necessarily out of motivation to save the deal to recover commission. But agents are in the service business. At least the responsible agents would instinctively go out of their way to help their sellers.

However, the potential for conflict of interest remains. Sometimes the agent's negligence could be the contributing factor in a seller's remorse. Take for instance, sellers are mistaken about the amount of the encumbrance on their properties. Many agents would check the profile and learn about them before the listing and hence are better able to warn the sellers the possibility that the sellers may find themselves having to put up their own money to close the escrow. This is one common cause of sellers' remorse. If this is the reason for sellers' remorse, sellers' attorney may advice sellers that their own agents may be a potential party in a lawsuit. Or when an agent represents tenants in common on a listing and he's aware that one tenant in common signed the purchase contract in the name of the other tenant in common without making sure there is a power of attorney authorizing such signature - and the agent didn't stop that from happening. The agent as a professional is expected to recognize that to be unlawful and his failure to stop it may be negligence, if not a breach of fiduciary duty, when the sellers decides not to go through with the sale  - also another situation where conflict of interest exists.  

In the legal profession, if an attorney has committed an act which he believes gives rise to legal malpractice, the attorney has an ethical duty to let his client know. In the real estate profession, no such duty exists. But should an agent attempt to help the seller solve his problem and avoid a lawsuit, disregarding any conflict of interest? Or should the agent refrain from doing anything and instead advise the seller to seek legal counsel immediately? This could be a difficult call.