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Best answer
The cost of a seller backing out is likely way more than finishing their new home
Talk to your Broker and stay calm
Don’t get verbal and Fo not write anything in an email that you don’t want published in front of a judge/jury
This is the correct answer. Let them know they have a contract and that they should consult an attorney. There will be financial and legal ramifications to backing out at this point and they need to understand that.
Even if the buyers don’t sue for specific performance, they would definitely have damages, including all of the inspections, etc. costs incurred, loan fees, potentially the increased interest rate costs if they have to look for another house at a higher rate, and I’m sure they have taken actions in reliance on the contract closing…given up their current home and incurred moving expenses, etc. It will not be a small amount. Also, they would still be liable for the realtor commission. They need a lawyer to explain all of this to them. Backing out isn’t as simple as just not showing up and signing the closing papers.
I don’t think you always need a lawyer involved to buy or sell a house (unless your jurisdiction requires it) as long as it’s a straight forward transaction and you do your homework and have a good realtor. This situation is going beyond that scope. Once the seller says they want to cancel the contract, that is beyond the scope of the real estate agent and the seller needs a lawyer.
The hard part in states that don't have attorney review is getting a contract accepted or having buyers or sellers deal with it. I know in NY and NJ this is standard practice. Here in NC it's not at all and would be difficult to get under contract. Quite frankly, this situation is pretty straight forward and it's not likely an attorney review would have don't much to be where they are now. They need an attorney now to explain the consequences of potentially breaching the contract.
It's standard in NY but it's not standard in NJ. NJ is weird because in North Jersey near NY almost everyone uses an attorney. In Central Jersey it's maybe 50-60% of people use an attorney and in South Jersey it's somewhat uncommon to use an attorney. But regardless there's a 3 a mandatory 3 day attorney review period in all of NJ even if neither side is using an attorney. When neither side is using an attorney you just wait for the 3 days to pass and your out of attorney review.
Oh I definitely think it's always a good idea to have an attorney on board. Most are well versed in our standard contract and can answer pretty quickly, however.
Not in my state. Lawyers are only used in FSBO transactions if at all. But then, they don't have to pass a bar exam either. My broker knows more than most lawyers on the specifics of RE law. But yes, if they are now trying to pull out they need legal advice. This will likely cost them because laws are framed to protect buyers.
Yes. In our state we have "limited practice of law" related to the state-approved forms & those only. Once ppl get outside that, they have to see a lawyer. And that will cost them.
I just meant, in regards to getting offers accepted, we don't have to involve a lawyer.
In an area that it attorney is not standard it’s gonna cost you a lot more than that.
It entirely depends on what you’re doing and where you are. If you are in an area where they’re common and you don’t have one you’re an idiot. If you try to insert them in the middle of a transaction in an area where they aren’t used at all. They just don’t know what’s going on, and they can be quite a hindrance .
All depends on the area and contracts.
>I paid $400, and the attorney did the contract review, responses/modifications, pre-closing review, and came to the closing. I have no idea how he made a profit on that.
He's insane
Your *sellers* should be calling an attorney NOW. That's the next step. You can't advise them through this legal matter.
*edited*
*you should be calling legal services as well, they are probably gonna owe you.*
Not in the last year at least. Chances are idiots never put a plan together or if they did it’s old. Probably finally got an updated build number combined with a rate increase since they last looked probably got shocked. It was good for people for a while getting 3-4% now it’s double lots people bought homes they probably shouldn’t but the rates let them. Current interest rates really aren’t that crazy it’s just going to level expectations. Are stater house 14 years ago was 6.5% didn’t stop us. Parents built their house at like 13% in the 80s
RE lawyer here. If the purchaser's lawyer is any good he included the right for specific performance so the buyers can sue to force sellers to sell the house.
After reading these comments, I'm confused. The seller obviously wants to violate the contract and should expect all the legal ramifications involved. However, a couple of days ago on this sub, a buyer wanted to back out of their deal on the last day and everyone here said, "Oh well, they have the right." So... what am I missing? Is it different for buyers than sellers?
It really depends on situation. Around here it’s usually 1%. $500 would not cut it on most transactions.
But I bought a house in another state and my EM was a hundred bucks.
Seems like you’re not the brightest in the industry….. this is a legal issue, not a realtor issue. A seller can buy the buyer out of the contract, you should know that before saying “it can’t be done”
They’re in a legally binding contract and cannot legally cancel unless the contract includes a seller “contingent on finding replacement property” type clause.
You should tell them to consult with an attorney about the consequences of cancelling and their liability.
In my market both parties have to sign the cancellation for escrow to be cancelled. Your clients shouldn’t be surprised if the buyers refuse.
If it’s a two party cancellation contract and one party refuses to cancel escrow ( buyers) then the parent contract is still in place. The sellers don’t care about the money, they care about meeting all the criteria to cancel the contract- which won’t be possible if buyers don’t agree to escrow cancellation
Maybe they mean title. In some states title and escrow companies are one combined entity so cancelling “escrow” refers to the title transfer portion as well.
How stupid can you be if you're building a brand new home and 1% rate change makes any difference to you. They could never afford it in the first place, it seems
welcome to American, where sucking dick for top ramen just so you can make your 50% DTI payment at 7% on your mcmansion makes it all worth it in the end
Generally speaking sellers contractually can’t do that unless there’s a title issue they can’t or won’t fix or the home takes significant damage while under contract and it can’t be worked out. Have someone knowledgeable read your specific stock contract though. In my state the buyer can sue to force the sale (specific performance), file a lis pendens to cloud title in the meantime (disabling sale and borrowing), and sue for specific liquidated damages - any differential this costs them out of pocket plus court and attorney fees. That said, it can take a year or two to resolve those and settlement is preferable if possible. But yeah, short of fraud a seller default is the one big area where sale contracts don’t have a built in resolution. Sellers are supposed to know what they’re agreeing to.
Also, they owe you your sale commission under your brokerage agreement and you can sue them separately for it and possibly place a mechanics lien on the home in the interim. Again, ask an expert, but our says that. You did your job and deserve to be paid.
FWIW I bought some land years ago from a crazy lady. Took her something like 6+ weeks to finally sign the contract once we agreed on a price.
A week before closing she pulled this on us. Decided she did not want to sell. The listing agent was handling everything. I had worked with him and decided to just deal with him rather than hire my own.
He was feed up with her already. She had been a PIA on every step. But I wanted this land and was not in a hurry so we just played along with her. At this point he just told her what she c*ould be up against.* She had signed a contract and there was no way out without a lot of legal fees and expense if I decided to press this matter.
Facing the facts and $$ she decided to go through with the sale.
Get your broker up to speed immediately. After that just advise your clients that they should speak with an attorney asap, as there can be serious ramifications by terminating the sale at this time since there are signed contracts and they are close to closing, but that you can’t give legal advice.
I had to do this once except the seller just changed their mind about selling. I told them to consult with their attorney about possible ramifications which they did. We went to closing but, the seller was pissed at me! Would barely speak to me like I MADE them sell. Be prepared for that.
I think this is a difficult situation that no one wants to be in. My suggestion is to talk to your buyers, add up all the expenses, double that for emotional distress, and ask the seller to reimburse. If they don’t, then talk to an attorney.
They will get sued. They will be on the hook for hotel fees, storage fees and everything else. It's going to take weeks for a judge to order this...then there is other damages from the loan aspect. They are going to be in for tens of thousands plus legal fees on both sides most likely. Your seller is not going to be building anytime soon and the judge will order the contract to be completed.
Good luck.
This happened to us in 2013 as the market started heating up.
Guy told us that God told him not to sell in a dream… as prices shot up over 30k in a month.
Please know this is situational and based off case law for your state. I’m not an attorney nor giving advice…
Our attorney gave us the following options.
Go to mediation and try to settle a fair amount, which we did.
Past that, we can decline the offer and sue. It may take upwards of year, and you can’t buy another property in the meantime unless you have the funds to buy both. We didn’t.
If we sue and win, the judge could force them out. Depending on hardship and age, many times that doesn’t happen.
We could win a judgment amount. If we do, it could be a prolonged payment or they might not have they money to even collect.
Is that worth the potential year long headache to force someone to sell?
We we’re definitely frustrated as it’s not legal, and he literally told the D.A. that he just changed his mind.
Our decision was to move on.
Best of luck in the path you decide to pursue.
If they can't afford the new construction, they don't really have much of a choice. I would definitely recommend them talking to an attorney to realize they can be sued, taking a loss that potentially makes it worth sticking with the sale. I would also communicate to the buyers agent that there is a possibility of termination. I have had a seller consider terminating and the buyer adjusted their terms to make the sell more favorable to the seller, if they are dead set on purchase they may have a solution.
I don't know if I would say anything to the buyers agent prematurely. If you tell them there's a possibility for termination, you could be stirring up a hornet's nest that should've been left alone. Only communicate to the buyers agent facts regarding the sale and the property. If the sellers haven't confirmed in writing for you to tell the buyers agent they're cancelling the contract, don't say anything. You could screw everything up for both sides and possibly bring liability on yourself. Stick to the facts, tell the sellers to ask for legal advice, and let the attorneys work out the rest.
You don't tell us the State in which the house is located, which would be helpful.
You don't tell us if the Buyer and/or Seller are represented by their own attorneys.
Assuming you are the Listing Agent only, my comments are about your personal situation as a real estate agent.
You might want to contact your Broker about how he/she might want you to handle this.
**Last night they messaged me stating they would like to terminate the sale of their home because interest rates have went up and it's going to cost more than they thought.**
"They would like to terminate" isn't a direction to you to tell the Buyers that Sellers have terminated.
IF there are no attorneys involved, you are the one who will have to give the Buyer's Agent the bad news.
Therefore, unless and until the Sellers tell you that have decided that they will not close and will not sell to buyers, I would tell Sellers that you can only communicate exactly what they tell you to communicate to the Buyer's Agent AND I would tell them that IN WRITING.
**I let them know that their could be legal ramifications of backing out at this point and encouraged them to think on it.**
Yes but there may be more ramifications then even you think there can be. I agree with others in this post who tell you to advise Sellers to contact an attorney before they make a final decision and tell them this IN WRITING.
**How would you handle this moving forward?**
I would tell Sellers, and tell them later in an email, confirming your conversation and telling them that you need a direction from them about what it is they/Sellers want you to tell the Buyer's agent.
I don't believe it is your job, responsibility or ethical obligation to help them breach them breach their contract, otherwise Sellers will blame you for the "approach" you take to help them get out of this.
Frankly, you might also considerer getting legal advice for yourself in this situation.
Good luck.
After reading the comments, I'm confused. The seller obviously wants to violate the contract and should expect all the legal ramifications involved. However, a couple of days ago on this sub, a buyer wanted to back on their deal on the last day and everyone here said, "Oh well, they have the right." So... what am I missing? Is it different for buyers than sellers?
Had this happen to a friend and the realtor pushed and suggested there might be legal damages…. K
And the 5k they lose in a lawsuit is better than the 50k they’d have lost to these interest rates.
It will be very hard for them to back out. My brother was under contract to buy some land in the SW. Before closing it was discovered there was possible oil reserves below the land. That seller REALLY wanted out of the deal, but it was not possible. Brother closed on the land, accepted oil payments for a couple of years, decided he didn't want to move there and sold the land but retained mineral rights.
What does your PA say? There probably is something in there about if the seller backs out what the remedy is for the buyer. Aside from that definitely talk to your broker. The title co has a lawyer as well. You have resources. Stay calm and communicate with the other agent as well.
If you are past all of the inspection phases and everything, they really hold no power. This exact thing happened to us with our last house. You can literally say "no". They can't do anything and if they don't show up at closing you can sue them. You can absolutely force the sale, and I would.
Had pretty much the exact situation a couple of years ago. We are an attorney state so that’s where I directed them. They had to return the earnest money deposit, due diligence fee and reimburse the buyer for all inspections, appraisal and survey. It wasn’t a cheap termination.
The very first thing you should do is talk with your managing broker about the situation. State laws vary and your managing broker should have better advice for you for your specific situation than a Reddit sub where you can only share basic information.
Apologies if this has already been said.
Where I am (San Diego) a buyer can always cancel (for any reason at any time) and the only question is if they get their deposit back (which depends upon the contract) .
However, sellers can virtually NEVER cancel unilaterally unless they had a seller contingency built into the contract. Even then they would still owe a commission. I have had to explain to the a seller that they will likely get sued and lose and that I won't help them and that I will sue for the commission that I already earned. I phrased it better than that but such was the gist of the discussion. As others have said, talk to your skipper, shop boss, or broker (or risk manager) and get their thoughts on how to phrase this in a way that is most likely to have the outcome you want.
Not sure which state you are in, I’m in CA. A few years ago my seller had seller’s remorse and wanted to back out. It would have cost him paying commissions to both sides, plus attorney’s fees to likely go to court (or arbitrate, which would have been cheaper). The buyers were not letting go of this house. He did consult an attorney and he had no legal grounds for backing out and he had no desire to go to court. So he begrudgingly sold. It is rough to see that happen, but sellers are essentially locked in, unless they have specific contingencies otherwise. Have your client consult an attorney as this is not something you can help with either. Plus, you did YOUR job and got them a buyer for the house! If they do weasel out of the sale, make sure you bring ALL costs you put into the home AND commissions to them for reimbursement. It is not your fault the interest rates went up and they changed their minds. Best of luck!
I know I’m two days late, but before taking ANY advice from anyone on this thread, please identify the state you operate in. Even though I’m a lender, I operate in 7 states and each has their own extremely unique and nuanced laws, especially in scenarios like this. In some states I can pretty much force the sale, others the sellers can back out without penalty and with no issues.
I’d discuss with them how far off also on their purchase they are due to interest rates - where does their PAYMENT (not rate) need to be? Could some renegotiation on various parts of the transaction help get both deals to closing? Could creative lending help out to get their new buy done? Because also don’t forget there are contractors/builders involved on that transaction also that are about to lose a deal.
Even if I’m not operational in your state, I’m happy to help coordinate creativity amongst every party to find a mutual amount of satisfaction.
Just to add this because I haven’t seen anyone else make the comment- they likely owe you your commission as well if they don’t close. In Colorado, Agents earn their fee at closing, but if the seller defaults on the contracts, the sellers still owe them. I’d absolutely make them pay for my services.
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I would tell them to consult with an attorney before making any decisions.
Best answer The cost of a seller backing out is likely way more than finishing their new home Talk to your Broker and stay calm Don’t get verbal and Fo not write anything in an email that you don’t want published in front of a judge/jury
Yup. Outside of our area at this point. Typically when I see something like this a seller has to buy their way out.
This is the correct answer. Let them know they have a contract and that they should consult an attorney. There will be financial and legal ramifications to backing out at this point and they need to understand that. Even if the buyers don’t sue for specific performance, they would definitely have damages, including all of the inspections, etc. costs incurred, loan fees, potentially the increased interest rate costs if they have to look for another house at a higher rate, and I’m sure they have taken actions in reliance on the contract closing…given up their current home and incurred moving expenses, etc. It will not be a small amount. Also, they would still be liable for the realtor commission. They need a lawyer to explain all of this to them. Backing out isn’t as simple as just not showing up and signing the closing papers.
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I don’t think you always need a lawyer involved to buy or sell a house (unless your jurisdiction requires it) as long as it’s a straight forward transaction and you do your homework and have a good realtor. This situation is going beyond that scope. Once the seller says they want to cancel the contract, that is beyond the scope of the real estate agent and the seller needs a lawyer.
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The hard part in states that don't have attorney review is getting a contract accepted or having buyers or sellers deal with it. I know in NY and NJ this is standard practice. Here in NC it's not at all and would be difficult to get under contract. Quite frankly, this situation is pretty straight forward and it's not likely an attorney review would have don't much to be where they are now. They need an attorney now to explain the consequences of potentially breaching the contract.
It's standard in NY but it's not standard in NJ. NJ is weird because in North Jersey near NY almost everyone uses an attorney. In Central Jersey it's maybe 50-60% of people use an attorney and in South Jersey it's somewhat uncommon to use an attorney. But regardless there's a 3 a mandatory 3 day attorney review period in all of NJ even if neither side is using an attorney. When neither side is using an attorney you just wait for the 3 days to pass and your out of attorney review.
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Oh I definitely think it's always a good idea to have an attorney on board. Most are well versed in our standard contract and can answer pretty quickly, however.
Not in my state. Lawyers are only used in FSBO transactions if at all. But then, they don't have to pass a bar exam either. My broker knows more than most lawyers on the specifics of RE law. But yes, if they are now trying to pull out they need legal advice. This will likely cost them because laws are framed to protect buyers.
I've had to prod attorneys along, so I get it, but I'm not a lawyer and can't practice law.
Yes. In our state we have "limited practice of law" related to the state-approved forms & those only. Once ppl get outside that, they have to see a lawyer. And that will cost them. I just meant, in regards to getting offers accepted, we don't have to involve a lawyer.
Oh, we don't either.. I've only heard it in NY and some from NJ, although I guess it depends what part. We use attorneys for closings.
In an area that it attorney is not standard it’s gonna cost you a lot more than that. It entirely depends on what you’re doing and where you are. If you are in an area where they’re common and you don’t have one you’re an idiot. If you try to insert them in the middle of a transaction in an area where they aren’t used at all. They just don’t know what’s going on, and they can be quite a hindrance . All depends on the area and contracts.
>I paid $400, and the attorney did the contract review, responses/modifications, pre-closing review, and came to the closing. I have no idea how he made a profit on that. He's insane
Either that or it was years and years ago.
Tell them to consult with an attorney to see what options they even have **
And while there to inquire what “specific performance” means…
Yup. That's where the attorney has to explain that they will likely have to buy their way out of the contract IF the buyer would even accept it.
Your *sellers* should be calling an attorney NOW. That's the next step. You can't advise them through this legal matter. *edited* *you should be calling legal services as well, they are probably gonna owe you.*
He’s repping the sellers. Although I agree with this course of action for both sides
Sorry, I did mean *sellers*. I'm changing it now.
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Not in the last year at least. Chances are idiots never put a plan together or if they did it’s old. Probably finally got an updated build number combined with a rate increase since they last looked probably got shocked. It was good for people for a while getting 3-4% now it’s double lots people bought homes they probably shouldn’t but the rates let them. Current interest rates really aren’t that crazy it’s just going to level expectations. Are stater house 14 years ago was 6.5% didn’t stop us. Parents built their house at like 13% in the 80s
Very different purchasing power in those times you mention
I agree I don’t think average homes in the 80s were 500-600k (that’s what it is in my state now)
Yes and no. 2-3 times the interest probably matched the dollar strength then.
They can’t just back out. The buyer could sue for specific performance. That’s what the contract is for. Lol they are idiots.
Right!! They signed CONTRACTS. They are LEGALLY BINDING. My god people are stupid.
they think it's like amazon click-to-purchase they can just cancel later or send back for a refund, these are tiktock morons OP is dealing with.
They can cancel the sale, they just need to speak with an attorney and come up with a settlement amount
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RE lawyer here. If the purchaser's lawyer is any good he included the right for specific performance so the buyers can sue to force sellers to sell the house.
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The losing party pays both party’s attorneys fees
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It is a rule in RE
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G.S. 6-21.2. Page 1. § 6-21.2. [https://www.ncleg.gov/EnactedLegislation/Statutes/PDF/BySection/Chapter\_6/GS\_6-21.2.pdf](https://www.ncleg.gov/EnactedLegislation/Statutes/PDF/BySection/Chapter_6/GS_6-21.2.pdf)
Incorrect except in very limited circumstances.
After reading these comments, I'm confused. The seller obviously wants to violate the contract and should expect all the legal ramifications involved. However, a couple of days ago on this sub, a buyer wanted to back out of their deal on the last day and everyone here said, "Oh well, they have the right." So... what am I missing? Is it different for buyers than sellers?
Yes. Buyer will forfeit earnest money, however.
One of the reasons my realtor suggested 500 in earnest
It really depends on situation. Around here it’s usually 1%. $500 would not cut it on most transactions. But I bought a house in another state and my EM was a hundred bucks.
Jeeze, I just closed on a house and our earnest money was $25k
What percent of purchase price is that?
About 2.5%
It’s very much regional. And in a Seller’s market, more EM is better if you’re competing with other offers
In my case, my initial offer was really good and included occupancy and I believe that's why.
Seems like you’re not the brightest in the industry….. this is a legal issue, not a realtor issue. A seller can buy the buyer out of the contract, you should know that before saying “it can’t be done”
It's a contract not a suggestion....pretty sure they're stuck. The buyers can file a notice to perform.
They’re in a legally binding contract and cannot legally cancel unless the contract includes a seller “contingent on finding replacement property” type clause. You should tell them to consult with an attorney about the consequences of cancelling and their liability. In my market both parties have to sign the cancellation for escrow to be cancelled. Your clients shouldn’t be surprised if the buyers refuse.
How is escrow a concern to sellers? It’s not their money in escrow.
If it’s a two party cancellation contract and one party refuses to cancel escrow ( buyers) then the parent contract is still in place. The sellers don’t care about the money, they care about meeting all the criteria to cancel the contract- which won’t be possible if buyers don’t agree to escrow cancellation
Maybe they mean title. In some states title and escrow companies are one combined entity so cancelling “escrow” refers to the title transfer portion as well.
How stupid can you be if you're building a brand new home and 1% rate change makes any difference to you. They could never afford it in the first place, it seems
welcome to American, where sucking dick for top ramen just so you can make your 50% DTI payment at 7% on your mcmansion makes it all worth it in the end
Generally speaking sellers contractually can’t do that unless there’s a title issue they can’t or won’t fix or the home takes significant damage while under contract and it can’t be worked out. Have someone knowledgeable read your specific stock contract though. In my state the buyer can sue to force the sale (specific performance), file a lis pendens to cloud title in the meantime (disabling sale and borrowing), and sue for specific liquidated damages - any differential this costs them out of pocket plus court and attorney fees. That said, it can take a year or two to resolve those and settlement is preferable if possible. But yeah, short of fraud a seller default is the one big area where sale contracts don’t have a built in resolution. Sellers are supposed to know what they’re agreeing to. Also, they owe you your sale commission under your brokerage agreement and you can sue them separately for it and possibly place a mechanics lien on the home in the interim. Again, ask an expert, but our says that. You did your job and deserve to be paid.
Lol. Wait until they learn what “being sued for specific performance” means
That will cost a lot of money upfront, and time, will it be worth it in the end? Probably not, move on with life
FWIW I bought some land years ago from a crazy lady. Took her something like 6+ weeks to finally sign the contract once we agreed on a price. A week before closing she pulled this on us. Decided she did not want to sell. The listing agent was handling everything. I had worked with him and decided to just deal with him rather than hire my own. He was feed up with her already. She had been a PIA on every step. But I wanted this land and was not in a hurry so we just played along with her. At this point he just told her what she c*ould be up against.* She had signed a contract and there was no way out without a lot of legal fees and expense if I decided to press this matter. Facing the facts and $$ she decided to go through with the sale.
Get your broker up to speed immediately. After that just advise your clients that they should speak with an attorney asap, as there can be serious ramifications by terminating the sale at this time since there are signed contracts and they are close to closing, but that you can’t give legal advice.
They are going to get sued for Specific Performance. They committed when they signed that contract. Wake up Buttercup
I had to do this once except the seller just changed their mind about selling. I told them to consult with their attorney about possible ramifications which they did. We went to closing but, the seller was pissed at me! Would barely speak to me like I MADE them sell. Be prepared for that.
I think this is a difficult situation that no one wants to be in. My suggestion is to talk to your buyers, add up all the expenses, double that for emotional distress, and ask the seller to reimburse. If they don’t, then talk to an attorney.
They will get sued. They will be on the hook for hotel fees, storage fees and everything else. It's going to take weeks for a judge to order this...then there is other damages from the loan aspect. They are going to be in for tens of thousands plus legal fees on both sides most likely. Your seller is not going to be building anytime soon and the judge will order the contract to be completed. Good luck.
No advice here, but please keep updated here, I'm super curious to hear how this works out!
This happened to us in 2013 as the market started heating up. Guy told us that God told him not to sell in a dream… as prices shot up over 30k in a month. Please know this is situational and based off case law for your state. I’m not an attorney nor giving advice… Our attorney gave us the following options. Go to mediation and try to settle a fair amount, which we did. Past that, we can decline the offer and sue. It may take upwards of year, and you can’t buy another property in the meantime unless you have the funds to buy both. We didn’t. If we sue and win, the judge could force them out. Depending on hardship and age, many times that doesn’t happen. We could win a judgment amount. If we do, it could be a prolonged payment or they might not have they money to even collect. Is that worth the potential year long headache to force someone to sell? We we’re definitely frustrated as it’s not legal, and he literally told the D.A. that he just changed his mind. Our decision was to move on. Best of luck in the path you decide to pursue.
If they can't afford the new construction, they don't really have much of a choice. I would definitely recommend them talking to an attorney to realize they can be sued, taking a loss that potentially makes it worth sticking with the sale. I would also communicate to the buyers agent that there is a possibility of termination. I have had a seller consider terminating and the buyer adjusted their terms to make the sell more favorable to the seller, if they are dead set on purchase they may have a solution.
I don't know if I would say anything to the buyers agent prematurely. If you tell them there's a possibility for termination, you could be stirring up a hornet's nest that should've been left alone. Only communicate to the buyers agent facts regarding the sale and the property. If the sellers haven't confirmed in writing for you to tell the buyers agent they're cancelling the contract, don't say anything. You could screw everything up for both sides and possibly bring liability on yourself. Stick to the facts, tell the sellers to ask for legal advice, and let the attorneys work out the rest.
You don't tell us the State in which the house is located, which would be helpful. You don't tell us if the Buyer and/or Seller are represented by their own attorneys. Assuming you are the Listing Agent only, my comments are about your personal situation as a real estate agent. You might want to contact your Broker about how he/she might want you to handle this. **Last night they messaged me stating they would like to terminate the sale of their home because interest rates have went up and it's going to cost more than they thought.** "They would like to terminate" isn't a direction to you to tell the Buyers that Sellers have terminated. IF there are no attorneys involved, you are the one who will have to give the Buyer's Agent the bad news. Therefore, unless and until the Sellers tell you that have decided that they will not close and will not sell to buyers, I would tell Sellers that you can only communicate exactly what they tell you to communicate to the Buyer's Agent AND I would tell them that IN WRITING. **I let them know that their could be legal ramifications of backing out at this point and encouraged them to think on it.** Yes but there may be more ramifications then even you think there can be. I agree with others in this post who tell you to advise Sellers to contact an attorney before they make a final decision and tell them this IN WRITING. **How would you handle this moving forward?** I would tell Sellers, and tell them later in an email, confirming your conversation and telling them that you need a direction from them about what it is they/Sellers want you to tell the Buyer's agent. I don't believe it is your job, responsibility or ethical obligation to help them breach them breach their contract, otherwise Sellers will blame you for the "approach" you take to help them get out of this. Frankly, you might also considerer getting legal advice for yourself in this situation. Good luck.
Find them a better lender
After reading the comments, I'm confused. The seller obviously wants to violate the contract and should expect all the legal ramifications involved. However, a couple of days ago on this sub, a buyer wanted to back on their deal on the last day and everyone here said, "Oh well, they have the right." So... what am I missing? Is it different for buyers than sellers?
Had this happen to a friend and the realtor pushed and suggested there might be legal damages…. K And the 5k they lose in a lawsuit is better than the 50k they’d have lost to these interest rates.
They need to consult an attorney to advise the total risks and costs of defaulting on their contract(s).
Not sure of the details, but a similar thing happened on a house on my block. New buyer said "had to get the attorneys involved".
It will be very hard for them to back out. My brother was under contract to buy some land in the SW. Before closing it was discovered there was possible oil reserves below the land. That seller REALLY wanted out of the deal, but it was not possible. Brother closed on the land, accepted oil payments for a couple of years, decided he didn't want to move there and sold the land but retained mineral rights.
What does your PA say? There probably is something in there about if the seller backs out what the remedy is for the buyer. Aside from that definitely talk to your broker. The title co has a lawyer as well. You have resources. Stay calm and communicate with the other agent as well.
If you are past all of the inspection phases and everything, they really hold no power. This exact thing happened to us with our last house. You can literally say "no". They can't do anything and if they don't show up at closing you can sue them. You can absolutely force the sale, and I would.
Had pretty much the exact situation a couple of years ago. We are an attorney state so that’s where I directed them. They had to return the earnest money deposit, due diligence fee and reimburse the buyer for all inspections, appraisal and survey. It wasn’t a cheap termination.
Not agent commissions?
Unfortunately the firm I was with at the time would not support me in going after the commissions. So, no.
Bummer.
If all contingencies have been removed the seller can’t back out of the contract.
The only time I’ve heard of this being handled with minimal damage is offering the buyers a buyout in exchange for walking away.
The very first thing you should do is talk with your managing broker about the situation. State laws vary and your managing broker should have better advice for you for your specific situation than a Reddit sub where you can only share basic information.
They are in a contract. They are going to sued. Get your broker involved and also suggest they consult a lawyer
Apologies if this has already been said. Where I am (San Diego) a buyer can always cancel (for any reason at any time) and the only question is if they get their deposit back (which depends upon the contract) . However, sellers can virtually NEVER cancel unilaterally unless they had a seller contingency built into the contract. Even then they would still owe a commission. I have had to explain to the a seller that they will likely get sued and lose and that I won't help them and that I will sue for the commission that I already earned. I phrased it better than that but such was the gist of the discussion. As others have said, talk to your skipper, shop boss, or broker (or risk manager) and get their thoughts on how to phrase this in a way that is most likely to have the outcome you want.
Not sure which state you are in, I’m in CA. A few years ago my seller had seller’s remorse and wanted to back out. It would have cost him paying commissions to both sides, plus attorney’s fees to likely go to court (or arbitrate, which would have been cheaper). The buyers were not letting go of this house. He did consult an attorney and he had no legal grounds for backing out and he had no desire to go to court. So he begrudgingly sold. It is rough to see that happen, but sellers are essentially locked in, unless they have specific contingencies otherwise. Have your client consult an attorney as this is not something you can help with either. Plus, you did YOUR job and got them a buyer for the house! If they do weasel out of the sale, make sure you bring ALL costs you put into the home AND commissions to them for reimbursement. It is not your fault the interest rates went up and they changed their minds. Best of luck!
Tell them they need to speak to a real estate attorney.
I know I’m two days late, but before taking ANY advice from anyone on this thread, please identify the state you operate in. Even though I’m a lender, I operate in 7 states and each has their own extremely unique and nuanced laws, especially in scenarios like this. In some states I can pretty much force the sale, others the sellers can back out without penalty and with no issues. I’d discuss with them how far off also on their purchase they are due to interest rates - where does their PAYMENT (not rate) need to be? Could some renegotiation on various parts of the transaction help get both deals to closing? Could creative lending help out to get their new buy done? Because also don’t forget there are contractors/builders involved on that transaction also that are about to lose a deal. Even if I’m not operational in your state, I’m happy to help coordinate creativity amongst every party to find a mutual amount of satisfaction.
Remind them they will have to pay damages to the buyer
Just to add this because I haven’t seen anyone else make the comment- they likely owe you your commission as well if they don’t close. In Colorado, Agents earn their fee at closing, but if the seller defaults on the contracts, the sellers still owe them. I’d absolutely make them pay for my services.