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When Can a Buyer Terminate a Contract in Real Estate?

June 25 2018
by Andrew S

When Can a Buyer Terminate a Contract in Real Estate?

 

The idea is that everyone walks away from a real estate transaction happy. Sellers make a profit. Buyers get a home. Agents collect a commission. Basically, everyone wins. However, what happens when suddenly something doesn’t feel right? Is there a way to back out of the transaction without totally hacking off all the other parties involved in the transaction?

It’s tricky but possible. With the right contract contingencies and clear communication with your real estate agent, it is likely to emerge relatively unscathed–as long as you don’t wait too long!

Ask about Cancellation Upfront

Before you even sign a listing agreement, ask your listing agent if you’re are bound to the contract, or if you can step out of the deal at any point along the way. The answer should be anything but “no.” Why would you list with any company that would not promise your satisfaction with its services? If an agent says it’s against their policy, then that is a policy you don’t want to work with. Period.

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Ask the Broker For a Cancellation

Maybe you didn’t ask upfront. You might be all caught up in the process by the time you realize you–for whatever reason–want to cut ties with the agent. If the agent doesn’t agree, you need to request cancellation through the brokerage. The listing, believe it or not, is not between you and the agent. It’s between you and the agent’s broker.

If The Broker Refuses?

When you request a cancellation, you can expect a bit of dispute. Regardless of the reason for terminating, odds are there won’t be an easy and clear route out. In the best case, brokers will be happy to assign you another agent to keep the listing in-house. In this situation, the broker will pay the fired agent a referral fee, and the process moves forward. Unfortunately, it probably won’t be that simple. In the case of a refusal, there are a few additional steps you can take.

Call Up A Real Estate Lawyer

A real estate lawyer can guide you through the complicated termination process. However, first, you’ll want to tell your broker. Sometimes that is enough to get the release, even before you dial up the lawyer. Just keep in mind that listing agreements are an agreement between two parties. And at the end of the day, a promise is a promise. If you genuinely feel like that the broker did something to break their end of the promise, the lawyer and be able to find a way to get you released.

Back Your Reasons

You can’t expect a successful backout agreement without a good reason. One of the most common issues (and the one that’ll most likely be understood by the brokerage) deal with inspection and appraisal.

Many home contracts include the contingency that the buyer and lender must be satisfied with the inspection and appraisal. The negotiations and agreements hinge on these results.

Without a doubt, some people use the inspection to slide out of a legally binding contract. However, if the buyer is adamant about certain repairs and the seller is not willing to bend, the buyer has a case for a bad deal.

Just Deal With It

Everybody should be happy in the real estate transaction, but there are times when it just doesn’t work out that way. There are legal aspects of the contract that could bind you to an agent. Each situation is unique so you will need to consult your agent, the brokerage, and a real estate lawyer to iron out your position.

Will Tenants Get the Boot?

It’s typical for a real estate contract to guarantee a sale, contingent on the buyer’s ability to sell his or her current home. In today’s market with low housing inventory, it may be more difficult for the seller to find a new home to purchase. The could be facing brutal bidding wars and high prices in his or her search.

Agents recommend their seller has a plan and even a backup for where to move after the deal closes. The possible need for contract contingencies for the seller to rent for a short time after the property closes.

Regardless of the situation, the other party can protect their best interests with a “kick-out” clause. A buyer loves to use this clause when they must sell an existing home before purchasing another. It allows the seller to continue showing the house while the buyer’s home is listed. If the seller receives a better offer, the original contract can end.

This kick-out clause is a reliable option for a seller who is concerned about missing the better deal. In this situation, the seller doesn’t necessarily have to back out of a contract to keep showing your home to potential buyers.

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Early Exit

The easiest way to to get out of a deal is to leave as soon as it feels wrong. The worst thing you can do is wait. It’s all about being open with your agent. The buyer typically had more options to terminate the deal throughout the contract period than the seller. The exit points are much easier for the buyer if financing is no longer available or when costs are greater than what the buyer is willing to take on.

Permission for an early exit is a consistent point in the transaction where not all clients receive “equal treatment.” For example, when a seller decides to back out of a deal too late in the game can be considered a breach of contract. The most important thing is to have a frank discussion with your agent, especially if you’re having second thoughts. Explain that you’re putting on the brakes, either for a brief period or indefinitely.

Working with an agent shouldn’t be difficult. That’s why we created Clever. Clever matches its clients with top local real estate agents. You’ll love the services, and you save money. Call us today at   1-833-2-CLEVER or fill out our online form to get started.