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How Can a Seller Terminate the Contract?

By Bahman Davani, CM at Texas Five Star Realty, Plano, TX (214) 457-7055

Real Estate Broker/Owner with Texas Five Star Realty, Plano Texas

June 14, 2013 03:57 AM

How Can a Seller Terminate the Contract?

In today’s crazy market, when there is a shortage of listings and as soon as a house comes to the market there would be several offers next day with full price or higher, Sellers want more and more and don’t negotiate or compromise. This has caused some unusual problems that we don’t have a pre-defined solution or even approved form to handle it. Among those is an example show below:

The Seller has accepted an offer and executed the contract. But, due to high demand and market shifts toward Sellers, he thinks he could get much higher for his house and wants to terminate the contract, of course legally and ending up with no penalty.

But, at least for state of Texas, there is no promulgated form by the Texas Real Estate Commission (TREC) or by Texas Association of REALTORS® that takes care of this situation. I have not seen any form or case that allows Seller to terminate contract, without Buyer agreement, unless Buyer cannot close on the specific agreed date or the lender does not approve the property.

That is interesting since I can come up with 17 different scenarios that Buyer can terminate the contract legally without any consequences and gets his earnest money back, but there is no single case that Sellers (Builders are exception) can terminate the contract legally without consequences.

Problem:
Seller has changed his mind and wants to get out of the contract without any consequences, But Buyer wants to go head with the contract and doesn’t want to terminate the contract.

If you have seen similar situation and have a proposed solution, please share it with us.

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Brian Park

Park Realty Investments - Murray, UT

Allowing sellers to willy nilly cancel contracts would be one major headache. I have had two buyers in my career that sued sellers for specific performance, and it only took the California courts a few seconds to declare they were entitled to their benefit of the bargain.

Result unhappy greedy sellers. Both times were in the early stages of a hot market and the sellers saw dollars floating away and didn't want to honor their word, and both were the kind that didn't want to leave a penny for anyone else when I presented the offers. These people would have no problem canceling contracts in good markets and renegotiating for more money any time they thought they could get some and causing buyers needless problems if they could legally do so. In these cases the listing agents were happy, the buyers were happy, I was happy, the lawyers were happy, they got paid, and the sellers were sick about the very very much smaller check they received from escrow, and I sure they would have liked the one they would have gotten if they had honored their word much better.

Finally for the poster about the Li's pend ens, the first poster was referring to the buyer I think which is right because that is the first step in suing the seller because a Li's pen dens is for title issues. But a second poster read it wrong and told of an attorney who filed one for the seller and got in trouble, which would be right. Greed stays on the list of the 7 deadly sins because it is here to stay.

Jun 16, 2013 04:09 AM

Cindy Jones

RealEstateAuctions.com - Rancho Mirage, CA

Cindy Jones

This has been a problem for a very long time.

Jun 16, 2013 04:18 AM

Eric Michael

Remerica Integrity, Realtors®, Northville, MI - Livonia, MI

Metro Detroit Real Estate Professional 734.564.1519

"Accidentally" flood the basement. Just kidding, of course! The sellers should be told to contact a real estate attorney for advice on this subject.

Jun 16, 2013 05:01 AM

Susan Isaacs | DC Real Estate Consultant

Compass | 1313 14th St NW DC 20005 - Washington, DC

Partnering with: DOMOofCompass

The best choice is to utilize strategies that present sellers with the best offers before ratification and avoid this situation. In the DC Metro real estate market, every good listing sees multiple offers. Standard practice here is to post something like "Offers due by Tuesday 6PM and will be reviewed by Noon Wed." This gives eager buyers an equal shot at the property, agents time to write a neat and organized offer, and competing buyers time to improve offers. Since offers are typically directly related to Days On Market, the best offers are usually received by this time and seller has no regrets later. Sorry you found yourself in the seller cancellation situation. Sticky! Good luck!

Jun 16, 2013 06:36 AM

Karen Anne Stone

New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX

Fort Worth Real Estate

From what I see, a Seller terminating a valid contract with a buyer is a two-step process.

Step One: Seller notifies buyer that Seller will not perform according to the terms of the ratified contract.

Step Two: Buyer's attorney notifies Seller and Seller's attorney that they are bringing suit for either specific performance, or for major damages.

By the way... if you have not figured it out yet, I am in full agreement with the second step.

Jun 16, 2013 11:51 AM

Dolores "Dee" Mauriello

Keller Willaims - Wayne, NJ

Realtor, Homes For Sale Wayne NJ

I had a situation where the seller refused to come to closing. Buyers bought the house next door.

Jun 16, 2013 01:53 PM

Pamela Seley

West Coast Realty Division - Murrieta, CA

Residential Real Estate Agent serving SW RivCo CA

I believe one of the comments here was "you can't force anyone to sell their home," which is true. I heard it directly from a judge in court. Anyone can get out of any contract, for a price, or perhaps no price. What that price might be, if there is one, the seller should find out from a qualified attorney.

Jun 16, 2013 07:18 PM

Greg Nino

RE/MAX Compass - Houston, TX

Houston, Texas

I'd llke to see your next blog about the 17 ways to get out!

Jun 17, 2013 12:22 AM

Karen Anne Stone

New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX

Fort Worth Real Estate

Greg: I would like to see it as well. Seventeen ways to get out of a valid contract? Hmmm.

Jun 17, 2013 01:43 AM

Marc McMaster

RE/MAX Centre Realty - State College, PA

Putting my clients before myself

In Pennsylvania the seller can terminate if the buyer doesn't meet their mortgage committment deadline in the contract. It's the seller's discretion.

Jun 17, 2013 02:23 AM

Randal Jenkins

Coldwell Banker F I Gray and Sons Residential, Inc. - New Port Richey, FL

Reasons the buyer may want to walk away. The best way for the seller to get out of the contract is to have the buyer want out.

Here are some of the reasons buyers have walked.

Bad inspection. Bad title. Bad appraisal. Pay the seller to get a release. Find the sex offenders on the street and warn the buyer.

Have the neighbors play loud RAP music when the buyer is inspecting the property. Or may loud 40's music. Whatever the buyer may not like.

What the seller should do is honor their obligation. A contract is a contract, not a position to start renegotiation.

Jun 17, 2013 02:31 AM

Dana Hollish Hill

Hollish Hill Group, JPAR Stellar Living - Bethesda, MD

REALTOR * Broker * Coach

Interesting. I won't give advice. I'll simply say that I went to settlement one time with my buyer clients and the seller simply refused to sell his home to us if we didn't give hime $10,000 more dollars. He ended up paying for all of our inspections and any other fees that my buyers incurred and we released and moved on to a better home. Both agents received nothing for their work on the deal. It was a real drag to be in a situation like that with no warning.

Jun 17, 2013 03:26 AM

Rick Phillips

Appraisals Guaranteed - Alexandria, VA

Expert & Customized Valuations

I had to look up the word " promulgated" :)

Jun 17, 2013 05:24 AM

Bahman Davani, CM at Texas Five Star Realty, Plano, TX (214) 457-7055

Texas Five Star Realty, Plano Texas - Frisco, TX

Homes for Sale in Plano, Frisco, Prosper, Allen TX

Everybody: Thank you very much for all your comments, inputs, thoughts.

Rick: "promulgated" is used in Texas for official, lawful and legal real estate forms published by TREC (Texas Real Estate Commission).

Greg and Karen: I will work on "BUYERS: Seventeen ways to get out of a valid contract" and let you know.

Jun 17, 2013 06:02 AM

Mike West

Heritage Oak Properties - El Dorado Hills, CA

El Dorado Hills, CA CDPE, CNE, Licensed Loan Origi

Sounds like a question for a real estate attorney. I would think contract law applies.

Jun 17, 2013 07:12 AM

Connie Addison

RE/MAX Sundance Realty II - Fort Myers, FL

Realtor

Great comments to a significantl issue. I hope that our escalating prices don't result in greedy sellers who think they can get out of contracts. I find it's really helpful to have a brother who's a lawyer here in Florida! When the sellers find out that they are about to be sued for non-performance, they usually decide to sell after all.

Jun 18, 2013 12:05 AM

Gene Riemenschneider

Home Point Real Estate - Brentwood, CA

Turning Houses into Homes

I was in contract on a building with a client for almost 6 months. The seller asked us to wait as he was in the red and did not want to do a short sale. He had to sell other properties first to get his cash to the table. Well in the interim the market boomed. He tried every way possible to get out of it. One thing he did was refuse any request we made for repairs, or adjustments in the contract. At the end of the day we completed the purchase, but it was very tense.

Jun 19, 2013 01:28 AM

Elva Branson-Lee

Solid Source Realty GA - Atlanta, GA

CDPE - Atlanta Real Estate & Short Sale Agent

Bahman, thanks for sparking this lively and informative conversation. I imagine we'll be seeing more of this kind of question in the field as values begin to rise.

Jun 19, 2013 02:43 AM

Joy Carter & Jeff Booker Brother and Sister Team

Keller Williams Parkland/Coral Springs Realty-GreatFloridaHomes Team - Coral Springs, FL

Trust Your Family's Move To Our Expertise!

Personally I give Sellers an OUT CLAUSE (My partner does not like this).

I tell them that within the first 90 days they can cancel without fee or penalty.

The reason I do this is because - THEY NEVER USE IT.

They are afraid to sign up (in spite of the recommendation) so I give them a comfort level.

They never use it, because we deliver so much more than we put in writing.

Well, honestly one client used it because she wanted to be off the market for the holidays but then she signed back up in January. Joy

Jun 20, 2013 11:34 AM

Dana Basiliere

Rossi & Riina Real Estate - Williston, VT

Making deals "Happen"

In Vermont if the buyer does not notify the seller in writing that the finance contingency has been met (by the due date and even if it has been met) the seller has the option to unilaterally terminate the contract if done in writing within four days of said date. It is the only way to legally; unilaterally terminate the contract (seller)

Jun 24, 2013 01:03 AM