Purchase Contract Cancellation

Asked by lisalee832, San Ramon, CA Wed Jun 27, 2012

Can the buyer cancel the purchase contract after home inspection and before the appraisal with or without a reason? Please advise.

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Eric H. Wong ’s answer
Eric H. Wong , Agent, Albany, CA
Wed Jun 27, 2012
I assume the buyer is using the inspection contingency to get out of contract. If they discovered something about the property through their investigation of the property, and they have not released the inspection contingency, than yes, they can submit a cancellation.
1 vote
If I discover something in the inspection report that is unacceptable, I'm assuming that within the contingency period I'd be able to cancel the sale and get my earnest money back. I would not have to make a demand of the sellers to do repairs, right?
Flag Tue Dec 15, 2015
Pacita Dimac…, Agent, Oakland, CA
Wed Jun 27, 2012
Buyers can cancel for just about any reason and get their deposit back provided they didn't release all their contingencies.

If the buyer requested repairs based on the inspections, but the seller won't grant that request, then the buyer is justified in cancelling the agreement and get his deposit back.

This is the case now with one of my listings. We provided inspections to the buyers. Nenetheless the buyers conducted their own inspections. There was nothing in the new inspection that was any different. But the buyers requested a major price reduction which the sellers won't grant. As such, by mutual agreement, we are cancelling the escrow and return the buyer's deposit.

Good luck. I hope this won't sour you on the experience. Please continue to search. The right property is bound to come along.
1 vote
As a non-realtor buyer, I would not think it good practice for realtors to provide inspections to buyers. It could be very self-serving in that the inspectors to gain your business will give a "soft" inspection rather than a truly objective third party inspection. I would never agree to this as your client, but rather choose my own inspector who had no business relationship or referral relationship with my realtor.
Flag Tue Dec 15, 2015
Bernard Gibb…, Agent, Danville, CA
Wed Jun 27, 2012
Simply stated, yes they can. one of the purposes of inspections is to satidfy the buyer that the home is in the condition they thought it was. If inspections suggest that this is not the case, certainly they can cancel, provided they had not previously removed inspection contingency.

Bernard Gibbons

Bernard Gibbons, J. Rockcliff Realtors
DRE License # 01331583
Phone (925) 997-1585 - bernard@bernardgibbons.com

1 vote
Neil Case, Agent, Martinez, CA
Wed Jun 27, 2012

Most of what has been said so far is true. A buyer can cancel based on investigation and inspections. BUT technically the buyer can't just cancel without giving you a valid reason that is based on the contingency protections they are afforded. I see some agents here are stating that a buyer can just cancel. But if they don't provide a valid reason then the other side could very well have a case that the buyer had not dealt in good faith. The catch here is that it is not that hard for a buyer to come up with a reason to cancel while they are still protected by their contingencies. For instance, a buyer could simply state that they were dissatisfied with a visit to the local schools or that they met a neighbor they didn't like. These are issues that are impossible for a seller to remedy. And so the buyer walks. And as long as that buyer is still protected by the investigation/inspection contingency they can cancel based on that type of issue. Since they are not in default they are probably due to get the deposit back.

But I've seen buyers walk without giving a valid reason when in fact what they had done is to offer on more than one property at once and ultimately choose to pursue the other one. That is not a valid reason and could expose them to legal consequences that could include the loss of the deposit. Consult an attorney whenever necessary.
1 vote
As unfortunate as that situation might be the reality of it is that in most cases a buyer can just walk away. Proving a motive, making the argument of not dealing in good faith, and going the legal route will just bring on headaches and the only one that benefits monetarily would be the attorneys involved. People do get cold feet and change their mind and until they sign docs there isn't much to do.
Flag Wed Jun 27, 2012
Ramon Concep…, Agent, Pleasanton, CA
Wed Jun 27, 2012
Typically as long as the Buyer is still within their Inspection Contingency period they can cancel their agreement. Once that Contingency had been removed, it becomes a little more difficult, but the Buyer should still be protected by the Appraisal and Loan Contingencies as long as those are in place as well.

Talk with your agent they should be able to advise you based on your contract.

Ramon Concepcion
Better Homes and Gardens Tri Valley Realty
1 vote
I appreciate your quick response! One more question, can the seller put the house back on market without signing the purchase contract cancellation & accepting another offer? Please advise again.
Flag Wed Jun 27, 2012
Fzate, Home Buyer, Newark, CA
Wed Nov 2, 2016
I'm selling a property in the Bay area. I felt that the buyers are very aggressive and are harassing us to pay for the contingencies. The buyers' agent even called our electrician (who we asked to give a quote) pretending that she is the owner and demanded that the electrical panel be changed. Can we (sellers) cancel the purchase contract now that we complained and now that they removed all contingencies?
0 votes
Ginger Hessl…, Home Buyer, Peoria, AZ
Sun Oct 9, 2016
can i get out of home purchase after inspection and all contingency's have been removed?
0 votes
Teresa Hirah…, Home Buyer, Honolulu, HI
Tue Jan 12, 2016
Would I be required to submit a written statement of cancellation to Escrow?
0 votes
Karen and Pa…, Agent, Cameron Park, CA
Mon Oct 12, 2015
Yes with any reason. It doesn't have to be a good reason but as a buyer you should not lie about one and agent shouldn't encourage their clients to lie either. Making up a story that you had a problem with a neighbor or the schools went good enough for you is a horrible thing to do to a Seller that you are cancelling on. They now have to disclose that the reason the last buyer cancelled was that the schools are bad or the neighbor is a problem and it was crap the buyer made up. A simple it's not going to work for the buyer is normally good enough. The sellers won't be happy but if the argue the fact that the buyers excuse wasn't good enough to hold their deposit they are only keeping their house off the market until it is cleared up. The goal is to get the house back on the market ASAP and not lose any more time off market than they already have.
0 votes
Bill William…, Renter, Melbourne Beach, FL
Mon Oct 12, 2015
Thanks, is this still valid advice? I'm in a similar situation now. I put in an offer on a Condo and then heard word there might be layoffs at work. I'm still under contingency for financing and inspection. The Condo is in California.
0 votes
Yes it is Bill. Possible layoffs is a big deal about moving forward on a new home. Good luck and I hope your job stays safe!
Flag Mon Oct 12, 2015
lisalee832, Home Buyer, San Ramon, CA
Mon Jul 2, 2012
Hello experts!
Yes, the buyer wants to cancel within the inspecation contingency period.
Thank you for your advices!
0 votes
John Juarez, Agent, Fremont, CA
Sun Jul 1, 2012
If a buyer wants to cancel within the appropriate contingency period it is very difficult for the seller to prevent cancellation or to penalize the seller in any way.
0 votes
Cindy Davis, Agent, San Diego, CA
Thu Jun 28, 2012
If you are within your contingency period (usually 17 days), you can cancel for any reason and get your deposit back. There is a cancellation form your agent should provide.

If you are beyond the contingency period, that's where things get sticky. You can certainly cancel but will likely forfeit your earnest money deposit.
0 votes
Some of the agents on this blog say that a buyer can cancel within the contingency period for ANY REASON and some are saying there has to be a GOOD REASON. It can't be both and it seems this is a gray area. Who judges if a buyer is entitled to the earnest money deposit returned if within the contingency period and how do that make that decision? What if the seller does not sign off on the cancellation?
Flag Tue Dec 15, 2015
Michelle Tho…, Agent, El Dorado Hills, CA
Wed Jun 27, 2012
You shouild be able to cancel if you haven't removed your contingencies but you do need to have a good reason...
0 votes
What would be an example of a not-good reason to cancel?
Flag Tue Dec 15, 2015
Steven Ornel…, Agent, Fremont, CA
Wed Jun 27, 2012
Hi Lisa,

It sounds like you have a reason for cancelling the contract, are within your inspection contingency timeline, and just want to know whether you have to provide the actual reason for your cancellation to the Seller.

Given all of my assumption are correct, CAR Form RPA (Residential Purchase Agreement) Para 10 covers buyer investigations and Para 14 covers your inspection contingency. Furthermore, CAR Form CC (Cancelation of Contract/Release of Deposit) is the form used to cancel a contract. Para 1E of the CC provides the Buyer/Seller to list a section of the RPA for the reason for termination. I'm speculating Para 14 is the source of your desire to cancel.

You should discuss your desire to cancel the contract with your Agent before making a final decision.

Be aware RPA [Para 10B] states the Buyer, at no cost, must provide complete copies of all investigative reports obtained by Buyer. The obligation to do so even survives after the termination of the Agreement.

Additionally, via the RPA, Para 14F, the Seller typically has 30 days to sign escrow instructions to return your deposit:

"If Buyer or Seller gives written notice of cancellation ….A Buyer or Seller may be subject to a civil penalty of up to $1,000 for refusal to sign such instructions if no good faith dispute exists as to who is entitled to the deposited funds (Civil Code §1057.3)." The Seller must release the deposit within 30 days per Civil Code §1057.3"
( Civil Code §1057.3 can be found at http://law.onecle.com/california/civil/1057.3.html )

Do you need to provide a specific reason for cancelling? No, you could simply refer to an inspection report when filling out the CC form I imagine.

Would it be in your best interest to actually tell the Seller why you are cancelling? Probably. Being upfront with people is a sign of respect, and sharing the true reason(s) for wanting to cancel the contract might actually help you arrive at a mutual agreement that works with both Buyer and Seller.

Best of luck with your purchase!

0 votes
Ramsey Messi…, Agent, San Ramon, CA
Wed Jun 27, 2012
You can cancel at any time and not proceed. Do you have a deposit with title and have you removed contingencies? If you have and the contingecies are removed then your deposit might be lost to the seller. Have you consulted your agent regarding this ?
0 votes
Steve Curtis, Agent, Walnut Creek, CA
Wed Jun 27, 2012
Assuming the contract being used is the standard RPA-CA, then based on item 14B(3) ... Buyer shall deliver to Seller either (i) a removal of the applicable contingency ... or (ii) a cancellation of this Agreement. Based on 14B(4) the contingency period remains in effect "even after the end of the time specified" until the contingencies are removed or the cancellation delivered, subject to the sellers rights to cancel after deliver to the buyer of a Notice to Perform.

And above all when there is any concern, consult an attorney for proper legal advice.

Steve Curtis
Broker / Owner
DRE # 350257
0 votes
Condo is in california
Flag Mon Oct 12, 2015
Thanks, is this still valid advice? I'm in a similar situation now. I put in an offer on a Condo and then heard word there might be layoffs at work. I'm still under contingency for financing and inspection.
Flag Mon Oct 12, 2015
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