Reader Question: We entered into a sales contract with a buyer two weeks ago. As the realities of the change set in, we have decided we don’t want to move. We have not yet told our agent. How can we get out of this mess, and what are our potential liabilities?
— Jerry and Mary B.
Monty’s Answer: Your awareness of liabilities is an important consideration. When people change their minds in real estate transactions there can be significant financial consequences. It is not uncommon for home sellers to experience a condition commonly called seller’s remorse, or seller’s jitters. These second thoughts are common enough that real estate motivational speakers have been known to suggest real estate agents keep a labeled prescription bottle containing sugar pills in their toolkit that reads; “Take two at bedtime and in the morning ask yourself, ‘What has changed since I signed the contract?’”
While this suggestion in a sales meeting is meant to be humorous, that question is the first one you should ask yourself. What has changed? Did you feel pressured into signing? Have your circumstances changed? Did you hear a rumor the buyer may not be a good neighbor for your old neighbors? Are you overwhelmed with packing?
Are the reasons you decided to sell still valid?
For example; Are you unable to physically maintain the home? Do you want to be near your parents in a different city? Have you outgrown the home you are selling? These reasons are still going to be there if you change your mind.
If you still consider escaping from the contract, the next step is to take the contract to your attorney and get a legal opinion as to the viability of doing so and the implications that follow. You need sound legal guidance to advise you. Here is a link that may help at https://dearmonty.com/8-tips-find-good-real-estate-attorney/ if you do not have one.
You should see the attorney quickly, like, today.
The buyer’s costs are fast increasing. They will be giving a notice to vacate, or sell their old home. Other expenses such as inspections, appraisals, application fees and more add up fast. Their expectations and excitement grow.
You are going to the attorney for their opinion. It should not take much time for them to review the documents and render their views. An hour of their time can cost between $80 and $500 so determine up-front what they will charge for their opinion. Remember that your attorney never knows your case as well as you do, so they will have additional questions to become more familiar with the circumstances.
It is possible the attorney may determine a legal reason the contract is not valid or that it may soon extinguish itself. Missed deadlines, improper signature protocols, and drafting errors are some examples, but if it turns out that is not the case, there may be a variety of choices as to minimize the cost of backing out.
Your attorney can explain your options after reviewing the contract and the contingencies. There may be different strategies they will recommend to minimize the chance a closing occurs. He or she will also have an opinion as to the options for breaking the news to the buyer if you decide you do not want to honor the contract.
Buyer remorse is as common as seller remorse
One of those options may be to ask the buyer if they will agree to negotiate a cancellation agreement and release you from the contract. If calling for a release is one of the recommendations, will it include a break-up fee to compensate the buyer for any expenses, anguish and an incentive to get an agreement? Remember that even if you can negotiate a release from the buyer, the real estate agents must agree to waive their right to their commission, or you will have added expense over any break-up fee.
Be prepared for a ‘no’ answer.
The buyer’s circumstances may be such they will fight for the house. Once you have an understanding of the potential financial risks, you are in a better position to decide if staying in your home is worth the price.
Lastly, hindsight is always raising its head in real estate. While you would have loved to stay in your home, if it does not turn out that way, some day in the future you may exclaim, “Am I ever glad we stayed on course.”
— Richard Montgomery gives no nonsense real estate advice to readers most pressing questions. He is a real estate industry veteran who has championed industry reform for over a quarter century. Send him questions at DearMonty.com.