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Trulia Phoen…, Home Buyer in Phoenix, AZ

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

Asked by Trulia Phoenix, Phoenix, AZ Wed Apr 24, 2013

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Your contract has everything you need to know in it! Buyer usually has an inspection contingency period, and may have other contingency periods to allow them to cancel the contract. Sit down with your agent and have them explain to you about the contingency periods and when they have to remove all contingencies. If they want to back out after they removed all contingencies, then the contract should specify whether they will forfeit part of their deposit.
0 votes Thank Flag Link Sat May 4, 2013
First of all it amazes me that agents are still not realizing that this is a profile Trulia created to stir up conversation and provide a stage for agents to express their knowledge.

The buyer typically has three default outs on a typical AAR contract which the seller has no recourse:

Inspection period typically 10 days, but really can be up to 20 days if you include the BINSR (10 days to get the BINSR to the seller, 5 days for seller to respond, 5 days for buyer to accept the response, or cancel the contract).

Appraisal. If the appraisal comes in lower than the offer price, the buyer can choose to re-negotiate or cancel the contract.

Loan contingency. If the buyer cannot get the loan fulfilled than the contract is cancelled. This can kill a deal the day before CoE with no recourse for the seller.

So with taking that in to account. If the buyer is not using any of these or other contract contingencies to cancel the contract, the seller can keep the earnest deposit. As others have stated there is a possibility of suing for additional performance damages. With the current market, there is really no need to go to this extreme since homes are selling in days. I understand there are many situations where the seller of the home is buying a new home, and cancelling the contract would lead to complications in their purchase deal. In that scenario the loan fulfillment is typically placed upon the ability to sell their current property.

Having deals cancelled is always a sticky situation and there is never two deals that are exactly alike so YMMV.

I will also add the disclosure that I would recommend they speak with an attorney regarding their rights and this message should not be considered legal advice.

If you like my response please feel free to like my facebook page!

Thank you!
0 votes Thank Flag Link Thu Apr 25, 2013
I'm not an attorney but I would recommend you speak with an attorney regarding your right and the information in this message should not be miss construed as legal advice.

1) You can keep the buyer's earnest money deposit for liquidated damages
2) You can sue the buyer for specific performance

The buyer also has contingencies build into the purchase agreement; therefore, you should read over the purchase agreement and determine if the buyer still has a right to cancel within guidelines of the agreement.

I hope this answers your questions but if not, then please feel free to call me at the number below. If this transaction does not work out, then I would be happy to assist you selling your home.

Sean Heideman, Broker
Position Realty
Office: 480-213-5251
0 votes Thank Flag Link Thu Apr 25, 2013
The default provisions are detailed within the contract.
0 votes Thank Flag Link Wed Apr 24, 2013
Dear Trulia:

Since this is a hypothetical question and we do not how far in the process in this assumption the contract has gone, a valid answer is not available here. The buyer has more exit clauses in a typical contract, example financing and inspection period.

Depending on circumstances, Seller can:

1. Keep the Earnest Deposit
2. Ask Attorney to review for damages, if any, since home was taken off the market

Reviewing with an attorney is the smart thing to do since each purchase contract is unique.

Jeffrey Masich, Realtor, GRI, MBA
HomeSmart
Arizona homes and land for purchase or sale
http://ArizonaHomesLand.com
JeffMasich@ArizonaHomesLand.com
480-556-0940
0 votes Thank Flag Link Wed Apr 24, 2013
None of us are parties to your transaction and it is somewhat unethical to comment.. It is best to address this question to your agent. If he or she can not help, then I'd call their broker. As others have mentioned, reading through the contract may help answer your questions too.
0 votes Thank Flag Link Wed Apr 24, 2013
The first question is do you have a Real Estate Agent representing you. This question should be directed to them because it depends on what the contract states and the timing of the contract. If the AAR Contract was used the Buyer normally has three contingencies. The first being the 10 day inspection period, the second the appraisal contingency, and the third is the loan contingency.

Have you received the Seller's Property Disclosure Statement? With the AAR Contract the Buyer has 5 days to back out of the contract if they find items they disapprove of on the SPDS.

The seller cannot back out of the AAR Contract. Again it depends on the way the contract is written. I suggest you speak with your Realtor.

Good luck. Tiffany
0 votes Thank Flag Link Wed Apr 24, 2013
Depends on the contract...there's usually several "outs" ...usually more outs for the Buyer than for the Seller!
0 votes Thank Flag Link Wed Apr 24, 2013
If the home is still in the inspection period, the buyer can opt to cancel out of the contract and the seller will begin remarketing the home for a new buyer.
0 votes Thank Flag Link Wed Apr 24, 2013
Are you referring to the 10-day inspection window? I recently had a buy back out of the contract the day of the inspection. He cancelled the inspection. Does the buyer then get to keep his earnest deposit?
Flag Thu Jun 5, 2014
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