Seller is trying to cancel a sale and threatening litigation

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2 Reply

Ben Zimmerman

Rental Property Investor · Raleigh, NC · Member since 2016 · 393 posts · 995 votes

5y

My non legal opinion.

If the seller is paying you to walk away, then this has nothing to do with the inspection or the roof, and has everything to do with the seller simply doesn't want to sell anymore.

It also doesn't make sense that they would threaten litigation to get out of the contract. If they are walking away from the deal (for any reason) it would generally be you taking them to court to perform, and not the other way around with them taking you to court so that they don't have to perform. This sounds like nothing more than posturing by their agent in the hopes that you will back down and just take the money and leave.

If the CA board believes you are still under contract, then you are highly likely still under contract and they have a legal obligation to perform. Obviously consult your attorney, but I would posture right back. Let the sellers agent know that steering is illegal and that if this case goes to trial that you intend on reporting them to the real estate ethics committee. It's amazing once a realtor gets personally threatened how their mind suddenly changes and they start talking their client into selling so that they don't get reported. Then I would let them know that you are prepared to go to court not only to force the sale of the home, but also your legal fees, lost rental revenue during the court process, emotional damages as the court case has you stressed out, as well as personal expenses as you have to take time away from your regular job to conduct this court case.... basically pile up any applicable fees that are allowable under CA law so they realize just how expensive this could get for them.

Either way this likely won't go to court and instead would go to mediation. I don't know how hot your market is, or how smoking of a deal this was, but a guaranteed 10k payday with no risk isn't exactly something to completely ignore.

6 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

5y

Originally posted by @Ben Zimmerman:

My non legal opinion.

If the seller is paying you to walk away, then this has nothing to do with the inspection or the roof, and has everything to do with the seller simply doesn't want to sell anymore.

It also doesn't make sense that they would threaten litigation to get out of the contract. If they are walking away from the deal (for any reason) it would generally be you taking them to court to perform, and not the other way around with them taking you to court so that they don't have to perform. This sounds like nothing more than posturing by their agent in the hopes that you will back down and just take the money and leave.

If the CA board believes you are still under contract, then you are highly likely still under contract and they have a legal obligation to perform. Obviously consult your attorney, but I would posture right back. Let the sellers agent know that steering is illegal and that if this case goes to trial that you intend on reporting them to the real estate ethics committee. It's amazing once a realtor gets personally threatened how their mind suddenly changes and they start talking their client into selling so that they don't get reported. Then I would let them know that you are prepared to go to court not only to force the sale of the home, but also your legal fees, lost rental revenue during the court process, emotional damages as the court case has you stressed out, as well as personal expenses as you have to take time away from your regular job to conduct this court case.... basically pile up any applicable fees that are allowable under CA law so they realize just how expensive this could get for them.

Either way this likely won't go to court and instead would go to mediation. I don't know how hot your market is, or how smoking of a deal this was, but a guaranteed 10k payday with no risk isn't exactly something to completely ignore.

this is NOT going to court there are no damages.. it will get worked out in mediation if the buyer wants to keep their position and seller wont sell. MOST CA NAR contracts if not ALL have mandatory mediation you cant sue until you do that.

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Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes

5y

@Dan B. We do not know the Exact language of your contract regarding removing the inspection contingency, sellers rights/requirements, etc regarding notices to perform, the required mechanics of that, etc. Language/practices in other states is irrelevant.
Having said that....even if you are technically legally correct, it is likely not worth the legal effort/costs to pursue it, even if that avenue is available to you.

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Charlie MacPherson

China, ME · Member since 2014 · 3k+ posts · 4k+ votes

5y

@Dan B. A few things stand out. With regard to the repair request, the seller is under no obligation to accept. Unless you sent a timely cancellation based on the inspection, the purchase contract stands. That's worth checking with an attorney as there may be some quirks in CA law.

The fact that they're offering $10K to you and $5K to your Realtor strongly suggests that they have a much better offer.

The offer of $5K to your agent might open up additional liabilities. Maybe "tortious interference with contractual relations"? Maybe improper / unethical attempts to influence? Maybe simple bribery.

If the defense attorney offers to pay the prosecutor, the court will shred that attorney along with his (former) career.

The seller's Realtor talking about how the neighborhood is dangerous opens him up to charges of discrimination, part of which is covered under "steering". (BTW, if the neighborhood is so bad, why isn't he anxious to get this horrible property sold?)

The seller's Realtor is trying to scare and bully you. You might, through your own agent, remind him of his ethical obligations under the Realtor Code of Ethics (honest and fair dealing), CA State law and Fair Housing. You might also suggest that he keeps his E&O insurance up to date. (Side note - some E&O policies severely limit coverage for Fair Housing violations.)

I would have your agent make a call to his managing broker. A smart broker will give him the biggest dope-slap he's ever had and will work to get the deal done for you. The broker doesn't need this kind of crap, the bad reputation or the hit to E&P premiums after a payout.

Your next steps are complaints to the local Board of Realtors and then to the state regulators.

Document everything and keep contemporaneous notes. You may end up needing them.

Anybody can sue for anything, but it seems to me that this is just a seller who got a much better offer and is trying everything he can think of to get out of a valid, signed contract. In this case, "no" is a complete sentence.

9 Reply

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

5y

Seems to me the contract became voidable at the point the seller sent you a notice that said no and perform, and you countered that notice. The "meeting of the minds" was no longer in place and either party could cancel the contract at this point unless the contract dictated that a certain number of volleys (back and forth) were allowed.

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3 Reply

Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

5y

I was totally on the buyer’s side until Russell’s post. I totally skimmed over the part where he countered their no. I’ve countered offers and then never heard back. When I asked what happened the response was the seller went with someone else when you countered. Although I believe some inspection negotiations just expire with the inspection contingency?

I’ve said 100 times you should only counter over deal breakers in a hot market. I’ve seen so many posts where “buyers” are countering over a $300 this or a $500 that. Or “they should replace the roof with a new one and I should pay the same price...”.

This is also why you shouldn’t be afraid to place “backup offers”. I’ve gotten several properties because the first buyer was difficult to work with or trying to nickel and dime the seller.

Dan B.

OP

San Diego, CA · Member since 2016 · 19 posts · 6 votes

5y

@Russel and @Bill, that's a good point I hadn't thought of. now, we did remove the inspection contingency prior to the expiration of the notice to perform. As I understand it, the notice to perform is 48 hours and it expired at midnight. We removed the inspection contingency at 11pm. We have time-stamped and signed documentation as evidence.

Now the seller realtor did send a cancelation notice prior to the expiration of the notice to perform, around 10pm. Does that void the contract? Is the notice to perform 48 hours upon receipt, or does it expire at the end of the day, i.e., midnight.

One other thing, is my realtor tells me the cancellation notice was not filled out correctly. The justification was for a contingency that didnt exist. It was something about needing to sell my primary residence. I rent. So that wasnt in the contract.

Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes

5y

@Dan B. 48 hours is....48 hours.

James Ma

Burnaby, BC · Member since 2017 · 282 posts · 268 votes

5y

@Dan B. It sounds like there's a lot of complications with this deal due to the timing and incorrect forms. If you want to look at pursuing the purchase further, you should definitely talk with your lawyer on how strong of a case you have.

Michael Plante

Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes

5y

Originally posted by @Russell Brazil:

Seems to me the contract became voidable at the point the seller sent you a notice that said no and perform, and you countered that notice. The "meeting of the minds" was no longer in place and either party could cancel the contract at this point unless the contract dictated that a certain number of volleys (back and forth) were allowed.

100% agree

When you countered there was no longer a contract

http://triagents.com/Legal/Cou...

Ben Zimmerman

Rental Property Investor · Raleigh, NC · Member since 2016 · 393 posts · 995 votes

5y

Originally posted by @Russell Brazil:

Seems to me the contract became voidable at the point the seller sent you a notice that said no and perform, and you countered that notice. The "meeting of the minds" was no longer in place and either party could cancel the contract at this point unless the contract dictated that a certain number of volleys (back and forth) were allowed.

There was no counteroffer made, you can't make a counteroffer once a legally binding contract has been signed, instead all proposed changes are amendments to the original offer. A sellers rejection of this amendment is not grounds to terminate the original contract. The original contracts 'meeting of the minds' is still valid regardless of any rejected amendments. In this instance the buyer was provided a notice to perform in order to remove his contingencies, there is nothing that says the buyer can not continue to negotiate items during this 48hrs. As long as he removes his contingencies within the allotted 48hrs (which appears in this case he did) then he has performed as required and the contract stands. In this case CAR lawyers were consulted and they believed the contract still stands, so I think it's fairly safe to assume that their opinion is correct and the contract stands.

Page 2 para 3 of this FAQ page details the difference between counteroffers and amendments and details that rejecting an amendment does not void the original contract.

2 Reply

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

5y

Originally posted by @Ben Zimmerman:

Originally posted by @Russell Brazil:

Seems to me the contract became voidable at the point the seller sent you a notice that said no and perform, and you countered that notice. The "meeting of the minds" was no longer in place and either party could cancel the contract at this point unless the contract dictated that a certain number of volleys (back and forth) were allowed.

There was no counteroffer made, you can't make a counteroffer once a legally binding contract has been signed, instead all proposed changes are amendments to the original offer. A sellers rejection of this amendment is not grounds to terminate the original contract. The original contracts 'meeting of the minds' is still valid regardless of any rejected amendments. In this instance the buyer was provided a notice to perform in order to remove his contingencies, there is nothing that says the buyer can not continue to negotiate items during this 48hrs. As long as he removes his contingencies within the allotted 48hrs (which appears in this case he did) then he has performed as required and the contract stands. In this case CAR lawyers were consulted and they believed the contract still stands, so I think it's fairly safe to assume that their opinion is correct and the contract stands.

Page 2 para 3 of this FAQ page details the difference between counteroffers and amendments and details that rejecting an amendment does not void the original contract.

http://triagents.com/Legal/Cou...

I only sell half a dozen houses per month. Thanks for educating me on when people can terminate a contract.

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Ben Zimmerman

Rental Property Investor · Raleigh, NC · Member since 2016 · 393 posts · 995 votes

5y

Originally posted by @Russell Brazil:

I only sell half a dozen houses per month. Thanks for educating me on when people can terminate a contract.

Maybe you should educate those CAR lawyers who apparently were incorrect and don't know basic law matters as they seem to be under the assumption that this contract is still valid.

Kenneth RolfePro Member

Boise, ID · Member since 2018 · 57 posts · 39 votes

5y

@Dan B.

I would say it all depends on what you want out of this property. If it’s an investment, it might be best to take the money and move on as it may not be worth the hassle. Clearly the seller has other plans.

If this is for your personal residence, then you need to decide how badly you want the house. Is it your dream house? How hard would it be in your market to find something comparable? How long are you willing/able to wait because it sounds like this could take awhile to resolve. If it’s worth the hassle, do your due diligence to make sure you are confident it will end in your favor. If you really want the house, you could always go back and renegotiate with the seller, but you might run the risk of them pulling the 10k offer off the table.

Comes down to risk/reward and only you can decide how to proceed. Good Luck!

Derek Meyer

Rental Property Investor · Largo, FL · Member since 2021 · 48 posts · 38 votes

5y

@Dan B. I say take it and keep shopping. There is no scarcity of good deals.

Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes

5y

@Dan B. Just an aside....the opinion your realtor for from the legal ht line was based on the facts as Layed Out by your realtor. If you had a 48 hour deadline to perform, and missed it due to thinking it “extended to midnight on the day the 48 hours expired”...and your agent told the hotline that you Made the deadline, then he received an answer based on incorrect information.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

5y

Originally posted by @Ben Zimmerman:

Originally posted by @Russell Brazil:

I only sell half a dozen houses per month. Thanks for educating me on when people can terminate a contract.

Maybe you should educate those CAR lawyers who apparently were incorrect and don't know basic law matters as they seem to be under the assumption that this contract is still valid.

As Wayne points out above.. the legal hot lines are generally verbal .. they are not reviewing all the signed docs etc.. so keep that in mind the agent may not have relayed it exactly how it really is.. so the advice from the legal hot line could be flawed.

I know my wife uses it when she needs to and its just her telling a story and getting feedback ..

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Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes

5y

@Dan B. Just an aside....the opinion your realtor for from the legal ht line was based on the facts as Layed Out by your realtor. If you had a 48 hour deadline to perform, and missed it due to thinking it “extended to midnight on the day the 48 hours expired”...and your agent told the hotline that you Made the deadline, then he received an answer based on incorrect information.

Dan B.

OP

San Diego, CA · Member since 2016 · 19 posts · 6 votes

5y

Appreciate all the comments and feedback. I've spoken to my realtor about the 48 hour window. Her response is, "You can send over a notice to perform any day you would like it's not two days from the notice to perform It's two days after that contingency is due that's why it's after midnight."

The contingency here is the inspection contingency, which was due on the 20th. We removed that contingency at 11 pm on the 22nd. The seller sent a cancelation of sale at 10 pm on the 22nd. Is that valid? Or would it need to come after midnight?

https://kagansblog.com/2012/04...

Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

5y

Some simple web searching seems to say you had 48 hours from the notice to perform, not from the expiration of the contingency. Did they send a notice to perform after the contingency expired and did you respond within 48 hours of that?

Well, you can let the contingency period expire. Under the standard CA purchase agreement that most buyers use, the contingency period doesn’t really end automatically. If buyer hasn’t actively removed contingencies when the deadline passes, the deal effectively goes into a sort of dormancy until seller issues what’s called a “notice to perform”.

A “notice to perform” is a notice sent by seller in writing to buyer that buyer needs to either remove contingencies or cancel the deal. Under the standard agreement, buyer typically has up to 48 hrs. after receiving the notice to decide what to do. If, after that period, buyer has not acted to remove contingencies, seller can unilaterally cancel the agreement.