Reader Question: I want out of the sales contract I signed yesterday. Can I change my mind and decide not to sell? If I can do this, what liabilities would there be to me?
Monty’s Answer: First know it is not uncommon for a seller to experience a malady called “sellers jitters.” Our most cherished memories are often associated with our homes. These memories can complicate our feelings when our lives change and our home is no longer conducive to our lifestyles. The first question to ask is, “What has changed since I signed the contract?”
What has changed? Did you feel the agent pressured you into signing? Have your circumstances changed? Did you hear a rumor about the buyer that makes you feel they may not be a good neighbor for your friends? Another similar question is this one: Is the reason or reasons I decided to sell in the first place still valid?
Seek a learned opinion
After answering those two questions and you still want out, the next step is to take the signed contract to your attorney and get a legal opinion as to canceling and the implications that follow. You need good legal guidance to advise you. If you do not have an attorney here is a link about finding a good real estate attorney.
Consider writing a one-page letter that sums up your current dilemma. You would do this to share the letter with the attorney to add clarity and consolidate their invested time. Additionally, a letter writing exercise can sometimes help you to recognize and defeat the gnawing source of concern. At this point, you are going to the attorney strictly for their opinion.
The attorney will recommend strategies after reviewing the contract, the contingencies, and the critical release dates. There may be options to recommend that minimize the chance a closing taking place. In any case, the attorney will also have an opinion as to the timing and the options for breaking the news to the buyer if you were to decide not to honor the contract.
The liabilities
The buyer is experiencing costs, future obligations and possibly some stress at this point. Their costs and obligations will rise as the transaction proceeds toward the closing. The earlier you put them on notice of your intent to withdraw the better the chance that they have not yet incurred large expenses. For example, if you notify them before they give their notice to vacate, you may avoid an expensive hotel bill.
Specific performance
In real estate law, specific performance is an order of the court requiring a party to perform a specific act, often the completion of the requirements of a contract. Real estate transactions are not the only types of contracts that utilize specific performance, but real estate is often the subject of specific performance actions because real estate is complex and, therefore, difficult to establish monetary damages. Sometimes, a court order is seen as the most equitable remedy to protect the interest of the innocent party to a contract.
Contingencies
Most purchase agreements have contingencies. Contingencies are conditions to the sale to which both parties agree to eliminate after the sales agreement is signed. Another way to describe this arrangement is the “due diligence” period. An example of a common buyer contingency is the confirmation of a lender to make a mortgage. The lender approves a loan application upon the completion of a satisfactory appraisal, employment verification (or proof of funds) and a review of the buyer’s other financial obligations that could affect their ability to make the mortgage payment.
Another common contingency is for the property to survive a physical inspection by a state licensed home inspector that reveals no major defects in the home that adversely affects the home’s value. Examples of common defects would be the discovery of a leaking roof or an unsafe furnace.
Until the contingencies are eliminated the transaction is conditional, or not final. It is during this period that real estate transactions can, and do, fail.
One option is to approach the buyer and propose a cancelation and release agreement of the contract for a flat fee. The real estate agents must agree to waive their right to their commission if the buyer agrees. The buyer’s circumstances may be such they will fight for the house, so be prepared for a “no” answer. On the other hand, there is such a thing as “buyer remorse” as well. The flat fee may be tempting.