Monday, December 4, 2023 / by Richard Eimers
It isn’t always a simple answer. A contract may offer advice, but buyers can sue for “specific performance.” And it’s not just the house – agents representing the buyer and/or seller may also deserve compensation.
FORT LAUDERDALE, Fla. – Question: We decided to sell our home a few months ago to move our family to a larger house. We found a real estate agent who listed our property. We entered a contract to sell a couple of weeks ago, but I was just laid off, and now there is no way we will get qualified for the larger mortgage.
Fortunately, we can afford our current home on my spouse’s salary. Can we get out of the deal? – Bobby
Answer: You may be able to get out of your deal, but, depending on how your contract was drafted, it might cost you.
You should know that you have two contracts to deal with: the sale contract with your buyers and the listing agreement with your real estate agent.
While I rarely see a clause in these contracts concerning your ability to purchase the new home, this can be included in contracts for circumstances like this. Typically, a buyer will purchase a new home contingent on selling their existing one, but there is no reason a seller cannot include a similar contingency.
If this feature was not included in your contract, your buyer would have the choice of letting you off the hook, demanding to be repaid the costs that were incurred in trying to buy the house, such as inspections and lender fees, or filing a lawsuit seeking “specific performance.”
Because each parcel of real estate is unique and irreplaceable, just receiving money would not fairly compensate your buyer, who asks the court to force the seller to complete the transaction.
However, since suing to force the home’s sale can take months or even years, most buyers will not want to take the time, opting to be reimbursed for the money they laid out.
You should speak with your buyer, explain the situation, and try to negotiate a small but fair payment to your buyer to let you off the hook.
You must also deal with the listing agreement with your real estate agent. With this type of contract, you hire your agent to list your property and find a buyer who is “ready, willing, and able” to purchase your house.
Even though you canceled the purchase, you still owe the commission you agreed to pay your agent. Carefully review the listing agreement to see what is owed and try to negotiate the amount.
Just walking away from the deal without resolving this with your agent will likely get you sued for the commission and the legal costs of bringing the suit. That said, many agents are understanding and will try to work out a fair compromise.