Bailing Out Of Your Agreement - Rescinding your Offer to Purchase

By
Real Estate Agent with Wolf Real Estate Professionals

One of the least desirable things a real estate licensee has to do from time to time in his "scope of workis  rescinding an offer for a buyer who wants out of the deal they have already negotiated.  Let me back up to the beginning of the transaction....

Dead End, End of the Line, DFT, I Quit!When a buyer want to look for a new home, the agent asks a lot of questions before they begin the house search.  "What area's would you like to live?"  "What price should we stay under?"  "What's the minimum of bedrooms you can live with, etc?" Of course, getting "pre-qualified" with a lender is standard fare before getting the car to go home shopping.

The job of the buyers agent is to get them in everything the buyer wants to see, and keep asking questions as you learn what the buyer seems to prefer; "Would a townhouse work?  How about a duplex for the rental income, etc."  By the time the buyer makes an offer, they've been exposed to the market for homes in the parameters they said they want to look at. 

I am not talking about the sad things, usually unforeseen things, that can happen while you are in a transaction.  If you would have seen this coming you wouldn't have put so much time into looking for a home.  These things are unexpectedly losing your job, getting your hours at work cut, given notice of a job transfer, etc.  The written purchase and sale agreement covers those things.  For the most part, the lender needs to verify the buyers job is stable, his income sufficient and, according to the lender, his likelihood for future employment is good. 

If any of those things cannot be verified, the buyer can't qualify for the loan, and he'll get his earnest money back.  Unfortunately, there are times when this occurs late in the transaction and the seller has spent lost marketing time, possibly other offers and can even have spent money anticipating the sale.  We want out of the deal....This is unfortunate, but if the buyers offer is contingent upon a getting a loan, and something changes so he cannot (through no fault of his own), he is entitled to get his earnest money back.

And I'm not talking about a home inspection that finds structural defects or other problems.  I'm not talking about sellers that refuse to fix home deficiencies.  If buyer and seller aren't in agreement, the transaction fails and the buyer is generally due to get his purchase deposit back.

No, the transactions I'm writing about are the times when the buyer just changes his mind for some reason and doesn't want to to buy.  Wait, you say! "Isn't earnest money put up for just that reason?"  My understanding of earnest money is that as long as the buyer and seller are in agreement, the house passes all the inspections and the buyer is finance-able, earnest is given so the buyer has "skin in the game" and doesn't just change his mind on this transaction.

Sadly though, everyone sees things from their own perspective, and will find justification for their actions. No one likes to lose money-even wealthy people.  When buyers decide they are not going to buy the property, they rarely say "Hey, that's what earnest money is for!  We'll just forfeit our earnest money to the seller."  No, normally they try to find some flaw in the agreement to justify why they should get their money back.  Usually, if it's early in the transaction the reason become some document they haven't received yet, say a disclosure of any common ownership, a pest inspection, a survey, etc.  I'm not saying anything is Here's my earnest money depositwrong with that document, but the buyer decides to refuse to accept the document as a reason to fail in the transaction and get his earnest money back.

Another sad fact, is that even though the buyers agent knows the stated reason is bogus and just an excuse, part of his responsibility is to represent the buyer and assist him.  At this point, the licensee is not getting paid for any of the time he's been showing homes, writing offers and attending inspections.  There is no hourly fee due the brokerage to assist the "ex-buyer" get his earnest money back. 

Unfortunately, if the real estate agent and the brokerage takes the stance the seller should lose their earnest money and forfeit it to the seller, they most generally will lose the buyers future business.  The earnest money goes to the seller as "liquidated damages"and the brokerage and licensee receive nothing.

It is a sad dance at this juncture.  The listing and seller agents come away from the experiance thinking they should have written tighter contracts, or gotten their hands on pertinent documents sooner or other similar thoughts.  The truth is there generally isn't anything you could have done.  If the parties to the agreement decide not to go forward, there is a lot of finger pointing, but really nothing you could have done to change the events. 

When the buyer and their agent finally find the property and the buyer says "I want to make an offer," the agent doesn't generally write an offer with"weasel clauses" or loopholes in the contract so they can back of of the deal.  The mission at that point is to buy the property.  

Same thing with the listing agent, the licensee representing the seller.  They generally will strike obvious loopholes in contracts submitted by the buyer and his agent.  If a clause is too ambiguous, they are generally struck early in the negotiation to firm up the contract and make sure all parties are committed to the sale.

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