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Trulia Chica…, Other/Just Looking in Chicago, IL

If both parties have signed the contract but the buyer wants out, what rights does the seller have?

Asked by Trulia Chicago, Chicago, IL Thu Jan 24, 2013

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Mark Bazzetta’s answer
Depends on the contract that was agreed to. For most residential contracts in Chicago, there are multiple contingencies that allow the buyer to escape the deal, almost up to closing day. Those deals with solid Attorney Review periods will generally be kept "open" until all contingencies are met and a CTC (Clear to Close) is given by the lender, that is if buyer-financing is involved. Until then, a buyer can, most of the time, get out of a deal for whatever reason they choose.

We've all have had deals die on the vine, so to speak. I had one about 5 years ago where my buyer just decided he didn't want to buy the property anymore. He didn't bother to let me or his attorney know until about 5 days before closing! If I remember correctly, attorney review was closed already, so there was a fight with the seller for the earnest money. The seller obviously wanted to keep it all as monies for the buyer defaulting. It went back-n-forth for a while until they both agreed to split the $15K earnest money. So my buyer lost $7500 for simply waiting too long to decide he didn't want the property. Had he decided he didn't want to buy it during the attorney review, he would have gotten it all back.

Good times,
Mark
Web Reference: http://www.MarkBazzetta.com
3 votes Thank Flag Link Thu Jan 24, 2013
BEST ANSWER
All these answers are basically correct. With Illinois being an attorney state (all real estate deals need attorneys), all our contracts have been written by attorneys in a way to help out what ever side they happen to be on, representing the seller or the buyer. That being said, the sellers real only paths are to either hold the EM (earnest money) hostage and petition their attorney for the EM or at least part of the EM as damages for taking the property off the market and losing time and money for carrying the property for longer then expected by the terms of the contract. This will some times apply pressure to the buyer to release some of the EM so they can use it on their next property they find if they need the money right away.

If the buyers reason is due to financing, then the seller can try and get a mortgage for the buyer using the parameters set forth in the contract, the problem there is that the buy can easily change their credit scores to stop the sale if they do not want be forced into purchasing the property.

So with every situation being different and this state's real estate legal side being run by Real States Attorneys, there are very few rights the buyers or sellers have in forcing the buyers or sellers to completely follow the terms of the contract. The time and money that is required to enforce these contracts with the amount of contingencies and loophole that have been added over the years, it is wiser to just try and find a new buyer for your property.

The good news for you is that in our market today, we are down in inventory and we have an increased amount of buyers in the market. So your broker should be able to re-launch your property and find more buyers for your place that might be able to supply you with a stronger and better offer then the current one that is cancelling on you.

I hope it all turns out for the best and good luck.

Todd
0 votes Thank Flag Link Fri Jan 25, 2013
Every situation is quite different. Most contracts are written with contingency that allow for attorney, financing, and home inspections for the buyer and are usually limited to 5 to 7 seven days from the date the seller executes the contract. The most common contingencies are Attorney Review, Home Inspection, and Mortgage. Because every situation can be different other contingencies can be added into a contract but we are going to keep to the basics. If the time contingency and all the above has been meet the buyer may find him or herself in a precarious position. Also note, in a standard contract to purchase if it is not stricken out, the contract has a provision for the seller to obtain financing on behalf of the buyer.

Remember both seller and buyer has signed off on the contract that is why it is so important that both parties have good attorneys and good brokers representing them.

In the real world a buyer does has the right to walk away from a purchase if the home inspector finds major defects in the property that were not disclosed, or during the attorney review the attorney finds something wrong and wisely advises his/her client to walk away from the purchase listing the reasons why.

Ah, did I forget the mortgage contingency? No I didn’t. In today’s economic climate with the new rules put in place for obtaining a mortgage, I feel a buyer’s broker is doing his/her client a disservice is if they have reached the contract stage and the client has not already been pre-approved for “a” purchase. Also, while we rely on our mortgage lenders to educate our buyers about why not to open any new lines of credit after being pre-approved, we as brokers must remind them not to do so as well. If our buyer opens a new line credit after the pre-approval, the loan ratio may change and they may no longer qualify for the loan. I have seen this happen.

What happens if all the contingencies have expired and have been met and the buyer simply wants to walk away? If the seller has been “damaged” the seller has the right to retain the earnest money as damages. Likewise, depending on how the contract was filled out the seller may be entitled to entire value of the contract. As simple as this sounds it is not. The buyer most agree and sign of to release the earnest money to the seller. If the buyer does not agree to release the earnest money, costly litigation could follow. The above would be handled by each parties attorney and is a worse case scenario.
1 vote Thank Flag Link Fri Jan 25, 2013
Angela Bailey, Broker, Chicago, IL

It depends on what the contract states, and why the buyer, "wants out". Did the buyer make his/her offer to purchase the home contingent upon a home inspection, attorney review period, mortgage financing, the sale of his/her home? Was a problem discovered during the inspection, attorney review etc...? Did he she notify you that a contingency had not been met? Did he/she notify you within the agreed upon time-frame? Typically, if the buyer is truly in breach of the contract, the seller may be able to keep the earnest money. However, the bottom line is you should look closely at the contract that both parties have signed, and consult with a real estate attorney to determine your rights.
1 vote Thank Flag Link Thu Jan 24, 2013
The starting point for finds the answer will be in the contract, especially if it is one of the local Realtor board documents commonly used.
The end point is to consult with an attorney. There is much room in between, and far more information is needed to begin to comment. The longer the time frame since the acceptance by all parties, the less likely exiting will be without cost and litigation.
1 vote Thank Flag Link Thu Jan 24, 2013
depends what stage your in per the contract. The best you can do is get their earnest money in some cases.
0 votes Thank Flag Link Wed Feb 6, 2013
Check with your attorney you might have a right to keep the earnest money.
Thanks,
Maja
0 votes Thank Flag Link Tue Feb 5, 2013
best to check with the attorney you are using, you are using an attorney right?
0 votes Thank Flag Link Sat Jan 26, 2013
do not waste your time enforcing a contract.. move on
0 votes Thank Flag Link Fri Jan 25, 2013
It depends on the reason why the buyer wants out and how the contract is written Need more info.
0 votes Thank Flag Link Fri Jan 25, 2013
If it's still within the attorney review and there is a reason the buyer is backing out the seller has no recourse. If it's past attorney review and the seller can prove some type of damages they can sue for the Earnest Money however each situation is specific to each deal.


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0 votes Thank Flag Link Thu Jan 24, 2013
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