Help! I need to back out of a sales contract.

34 Replies

An agent approached me about a client who is interested in my primary residence. There is a home a few doors down that just went on the market for 999K.  I hired an agent to represent me in the sale of my home and asked that she proceed with all correspondence with buyers agent  I explained to her that I would not agree to any purchase until I know what the comp down the street is under contract fo. The reason for this is that we live in a very unique neighborhood with restored mid century modern flat roof homes. Our street is tree lined and stands out from most streets in the area.


the agent presented an offer to me and I explained that I would not accept an offer until we knew what the comp was on the house down the street. She then proceeded to tell me that it was under contract for 1,050,000. She said she received that Information from the listing agent. 

I used this Critical Information to make our decision and we accepted an offer at 900K since the other house had a lot more upgrades. 

Come to find out the information she provided was completely false and it actually closed for 1,130,000. 

I now feel that she was negligent with the comp she provided and my entire decision making process was based on this. 

What can I do? I want to cancel the contract. I now know I am selling for severely under market value as even though the other home has more upgrades, mine is much larger, same style and completely updated. 

Is there any way out based on my agents negligence? 

@Hanan K.   A lesson I learned over the years is to collect all of the facts before going nuclear.  It could well be that the deal on the other house fell apart and the higher price was from a different buyer.  In other words, your agent may have been thorough and truthful.

Don't forget that your interests and those of your agent are aligned.  The higher the sale price for your home, the more commission your agent makes.  

For the sake of discussion, let's assume that your agent pulled that number out of thin air.  The fact remains that you accepted an offer.  It's a contract and you signed it, so unless there are terms in the contract that allow you to pull out under particular circumstances, there's no way to cancel it unilaterally.

You could go to court and argue that's the contract is void, arguing that it was unconscionable, a mistake, that the parties were either misidentified or incompetent, etc.  https://www.upcounsel.com/how-...

That will likely take years to get through court and rack up 5 figures in legal fees.

You could file a claim against the agent's E&O policy, but you will have to prove your numbers and damages. In what sounds like a very hot market, that's going to be extremely difficult. True market value of a property is what a willing buyer and seller agree to and that's a volatile, moving target.

If you're determined to follow through, gather your evidence and talk with an attorney (and I'm not one). 

My prediction is your case will have a very low chance of success and a very high chance of frightening legal bills.

There is a reason why in my state (NC) the contract price is not used for comps or appraisals: through the inspection process it is not uncommon for Financial Concessions to be made. I’ve had as much as $30,000 taken off the contract price, and it was a sub$300,000 home. The Contract price is merely a new “Ceiling.”

If you believe your home is under-priced, hold strong on Financial Concessions. If it is not too late, get a high Due Diligence. 

Lastly, once the property is put under contract, the “power” goes the the Buyer. The Buyer has more options to back out of the contract. If you (Seller) back out, be prepared to refund any monies they’ve given you, spent along the way (inspections, professional services) and other compensatory damages.

@Hanan K. I agree with all the previous posters. Best you can hope for is they ask for repairs or concessions in which case you could just refuse and hope they back out but your options are pretty limited unless you can find a mistake made in the contract that would render it invalid or unenforceable. I've seen it before where agents forgot to fill out dates or get the right signatures and if one party doesn't agree to correct it, the deal stalls and eventually times out.

How was your agent “negligent with the comp” if that is the price relayed by the listing agent. If you were Truly concerned about this one comp, you should have waited until it closed. Also, you have no idea what additional concessions the seller paid for. 

@Michael Plante We’re talking $80k here. 

@Michael Plante She was negligent in that she later admitted that she had not actually spoken to the list against. That 1,050,000 was the “rumor on the street”. I did not ask her for the rumor on the street. I Would have waited to see the other hoke close if I had any indication that she had incorrect information. 


Originally posted by @Hanan K. :

@Michael Plante She was negligent in that she later admitted that she had not actually spoken to the list against. That 1,050,000 was the “rumor on the street”. I did not ask her for the rumor on the street. I Would have waited to see the other hoke close if I had any indication that she had incorrect information. 

Advice is still the same 
talk to an Atty 

 your contract is not with the agent 

It is with the buyer.  Your responsibility is to them 

The agents responsibility is to you.  Do you have it in writing or anyway to prove she said this to you?

Even if you do will it hold up on court.  Fix what you can fix now 

@Charlie MacPherson well, it turns out she never actually even spoke to the list agent. She admitted it was the “rumor on the street” ...in her words. 

I understand the enforceability of the contract if the buyers really want to pursue but how often does a judge actually force a sale on someone’s primary residence?  I’ve offered to pay for all reports and costs to make them whole. I am just worried they sue for performance which my understanding is a long and lengthy process and often results in little success. 

@Scott Ashworth Yes, I am 100 percent willing to refund them for any monies out of pocket. 

The whole thing is a big mess. It’s an inter office deal. Both agents from same office. There is no listing agreement. It was off market and done hastily. 

I have no problem paying for reports, inspections as well. I’m just wondering how likely a judge rules that forcing me to sale our primary residence. At this point, I don’t even want to sell.  Have you seen sellers back out ? Were any sued to perform? 

@Michael Plante I don’t have it in writing but she’s not denying it and has admitted such to her broker. 

She gave me the impression that she had concrete information when it turns out she never even spoke to him and it was just the “rumor on the street”. What kills me Is that I would have just waited for that house to close as I have been waiting months for that house to come on the market but I thought she knew what she was talking about and I trusted the information she gave me. The whole thing is a mess. It’s an inter office off market deal and my husband is absolutely livid. He feels played (understandably) and is refusing to move forward. 

How often does a judge rule go force the sale on a primary residence ? Is it likely?

one more thing I forgot to add and I don’t know if this makes a difference. She sent the RPA to my email address for both me and my husband. So I signed for both of us. He has never actually signed anything. He is the most livid in this situation and prepared to let a judge know that he never signed anything. It wasn’t even sent to him. 
does that help/hurt us?

Originally posted by @Wayne Brooks :

How was your agent “negligent with the comp” if that is the price relayed by the listing agent. If you were Truly concerned about this one comp, you should have waited until it closed. Also, you have no idea what additional concessions the seller paid for. 

@Michael Plante We’re talking $80k here.

ON top of that NO AGENT is going to tell another agent what its under contract for thats a clear violation of ethics etc..  rumors are rumors.. you never know what it sells for until it CLOSES and some states are non disclosure so unless you can get your hands on the actual settlement statement you still wont know. 

really depends on how hard the buyer wants to come for the deal.. you could do nothing and the buyer just says screw it not worth fighting for .. you can play the blame game and such and see what that does for you .

you can threaten the agent and see how far that takes you etc.

bottom line if you dont want to sell the buyer will have to TAKE you to court and spend a ton of money to do that. Very few are willing to do that very few.

 

Unfortunately, "under contract" isn't a comparable.

And your realtor should have advised you of that.

Not trying to be rude or dismissive because this is a crappy situation. But you should have confirmed, and should always "know your out."

I guess you could just be hardlined and not negotiate on anything and hope they cancel because of inspection or on a counter-offer or something else.

@Hanan K.

Here’s an idea. Just stand by your contract. You liked it when you signed it. It is not the buyer’s issue. Trying to back out now is just bad form in my opinion.

@Jay Hinrichs Thank you for your response. I’ve read your responses on similar issues where a seller backs out. It seems like it’s not likely to make it to court unless the buyers really want to invest the time and money to do so. We are in California. So it would go to mediation first. I’m happy to reimburse the buyers for all costs and damages. I don’t fee they’ve incurred a lot of damages being it’s only been a few days.

Have you seen cases Where buyers successfully sued owners of a primary residence to perform on the sale of a home. Just wondering how likely a judge orders us to complete the sale. 

Also, not sure how this affects anything but there was no listing agreement with the agent. Transfer disclosure statement has not yet been signed and returned to us. 

Originally posted by @David A Lisowski :

I was adamant that I would not accept an offer until I knew what it went for. She told me she verified with the agent the contact price. Come to find out that was not true. 
it is a crappy situation on so many levels. It was a messy inter office off market deal and lots of things were done incorrectly. I should have waited to see the home sold for myself. Lesson learned. I just really trusted this agent as she is also a close friend. lesson learned!

 

Originally posted by @Dave E. :

@Hanan Kim

Here’s an idea. Just stand by your contract. You liked it when you signed it. It is not the buyer’s issue. Trying to back out now is just bad form in my opinion.

I get that.  Can’t say I liked it. More felt pressured as it was a personal friend. I just had a baby. Stress levels and pressure was high. Definitely a mistake to get involved in any of this in the first place! 

 

Originally posted by @Hanan K. :

@Jay Hinrichs Thank you for your response. I’ve read your responses on similar issues where a seller backs out. It seems like it’s not likely to make it to court unless the buyers really want to invest the time and money to do so. We are in California. So it would go to mediation first. I’m happy to reimburse the buyers for all costs and damages. I don’t fee they’ve incurred a lot of damages being it’s only been a few days.

Have you seen cases Where buyers successfully sued owners of a primary residence to perform on the sale of a home. Just wondering how likely a judge orders us to complete the sale. 

Also, not sure how this affects anything but there was no listing agreement with the agent. Transfer disclosure statement has not yet been signed and returned to us. 

Well first off I used to live @ Silverado CC and loved it there.  Non binding mediation is just that non binding you need to see if its binding.  And if there was litigation you need to understand if your going to be subject to potential claim for attorneys fee's should you lose.. A good local CA broker should be able to answer you questions on the transfer docs etc being signed.. Although I know in Oregon sellers disclosures etc don't alleviate the seller from liability but they do allow the buyer to back out last minute without losing their EM.. 

My other experience with this was when I did sue for performance and it was an owner occ property.. Now situation was different and this is ORegon..  I had advanced 50k to the seller to pay back tax's and some pressing bills she had.. When the day of closing came all my money was in Escrow CASH ready to close and she was a no show. So if it was just a small deposit I dont know if I would have fought it.. but it was 50k and it was a project we were going to develop not just live in or make a marginal profit on a fix and flip  ( but it would take a lot of work on our side for land use etc to create the big equity upside).. that all said I sued her we left  in Escrow the entire purchase price for a little over 2.5 years and finally got a court order that required her to sign. She still would not sign.. So we had to go back to the judge and get another type of order that the title company could rely on to transfer and insure the title.. But because of this the title company would not insure this for an additional 90 days in case she appealed .. so long and short of it 6 figures sitting in escrow for almost 3 years you can imagine the attorneys fee's  and we ended up with the property and did our thing built 3 new builds and sold them so all in 4 year process .. So how many buyers are going to do that to live in a house ???  You need to check on how specific performance is handled there Do they have to put all the money in escrow like we did and let it sit there while it winds its way through court system ??? thats a big question..  So at this point good broker for free advice then attorney which your allowed to have at mediation.. figure out if mediation is binding.. 

 

Originally posted by @Jay Hinrichs :
Originally posted by @Hanan Kim:

@Jay Hinrichs Thank You much for your detailed response. It was extremely helpful and I am checking with my attorney ASAP to find out whether they would need to hold CASH in escrow. If so, I can’t imagine that they would be willing to go through all that. I do have legal insurance that covers my attorney fees if necessary.I truly hope it doesn’t go that far but I thank you for helping to ask the right questions! 

 

Originally posted by @Hanan K. :
Originally posted by @Jay Hinrichs:
Originally posted by @Hanan Kim:

@Jay Hinrichs Thank You much for your detailed response. It was extremely helpful and I am checking with my attorney ASAP to find out whether they would need to hold CASH in escrow. If so, I can’t imagine that they would be willing to go through all that. I do have legal insurance that covers my attorney fees if necessary.I truly hope it doesn’t go that far but I thank you for helping to ask the right questions! 

 

Now keep in mind my contract was an all cash purchase.. if they have a financing contingency or are getting a loan then i suspect they would only have to put their down payment into escrow as delineated on the on the Purchase and Sale agreement then not sure if the lender has to actually fund and let the money sit in escrow .. but then no lender is really going to do that.. so it becomes interesting ..  what area of Napa is this home ?  That's my stomping grounds my Dad had a real estate company in Lake co just north of Napa ( you probably familiar) started in the mid 60s so we have been going through Napa valley up Silverado trail all these years..  My very first sale of an improved property as a young agent in 75 was a commercial building in Calistoga sold for 25k LOL.. But hey i double ended it and made 1,500 dollars.. not bad when wages in those days were about 5 to 10 bucks an hour.

 

@Hanan K.   Things are getting stickier...

First of all, do you have a paper trail that proves you asked your agent for the contract price on house #2?  And do you have both her answer and her admission that it just a "rumor on the street" in writing?

If you can prove your allegations, it seems that you were negligently misled and relied on her misleading statements to your detriment.  Those are two of the key elements in these kinds of cases.

If you have the paper (email/text) trail to prove it, you still need to establish your damages.  An appraisal is the best way to go, but appraisers can be pretty far off the mark sometimes.

Assuming that you can prove the allegations and the amount of damage you suffered (or will suffer), you may have a claim against her E&O policy or you might have a case for a lawsuit.

Three other avenues to file a complaint, but will probably not get you any money are her managing broker (be sure to mention that you're going after E&O), the state board of registration in real estate and if she is indeed a Realtor (member of NAR), the local Board of Realtors.

At this point, you need the advice of an attorney. I'd contact one who specializes in real estate law and spend a few hundred dollars for an hour of their time.  They may even do a no-cost initial consultation.

Originally posted by @Hanan K. :

An agent approached me about a client who is interested in my primary residence. There is a home a few doors down that just went on the market for 999K.  I hired an agent to represent me in the sale of my home and asked that she proceed with all correspondence with buyers agent  I explained to her that I would not agree to any purchase until I know what the comp down the street is under contract fo. The reason for this is that we live in a very unique neighborhood with restored mid century modern flat roof homes. Our street is tree lined and stands out from most streets in the area.

the agent presented an offer to me and I explained that I would not accept an offer until we knew what the comp was on the house down the street. She then proceeded to tell me that it was under contract for 1,050,000. She said she received that Information from the listing agent. 

I used this Critical Information to make our decision and we accepted an offer at 900K since the other house had a lot more upgrades. 

Come to find out the information she provided was completely false and it actually closed for 1,130,000. 

I now feel that she was negligent with the comp she provided and my entire decision making process was based on this. 

What can I do? I want to cancel the contract. I now know I am selling for severely under market value as even though the other home has more upgrades, mine is much larger, same style and completely updated. 

Is there any way out based on my agents negligence? 

"... based on my agents negligence?" Who has responsibility for due diligence?

I think you may have learned an expensive lesson.

My $0.02 ...

Originally posted by @Jay Hinrichs :
Originally posted by @Hanan Kim:
Originally posted by @Jay Hinrichs:
Originally posted by @Hanan Kim:

@Jay Hinrichs Thank You much for your detailed response. It was extremely helpful and I am checking with my attorney ASAP to find out whether they would need to hold CASH in escrow. If so, I can’t imagine that they would be willing to go through all that. I do have legal insurance that covers my attorney fees if necessary.I truly hope it doesn’t go that far but I thank you for helping to ask the right questions! 

 

Now keep in mind my contract was an all cash purchase.. if they have a financing contingency or are getting a loan then i suspect they would only have to put their down payment into escrow as delineated on the on the Purchase and Sale agreement then not sure if the lender has to actually fund and let the money sit in escrow .. but then no lender is really going to do that.. so it becomes interesting ..  what area of Napa is this home ?  That's my stomping grounds my Dad had a real estate company in Lake co just north of Napa ( you probably familiar) started in the mid 60s so we have been going through Napa valley up Silverado trail all these years..  My very first sale of an improved property as a young agent in 75 was a commercial building in Calistoga sold for 25k LOL.. But hey i double ended it and made 1,500 dollars.. not bad when wages in those days were about 5 to 10 bucks an hour.

 It’s in North Napa, maybe 8 minutes from Yountville. Silverado Trail is beautiful and such a fun drive!

 

I've been actively looking for a property in CA and asked my agent a similar question.  We've seen over 30+ homes and I was curious which bids are 'winning' because we continue to get overbid by cash buyers.   She point blank told me that no one can ever know what is under contract until the property closes and the purchase of the property is registered, finalized/closed with the city and title complete.