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legal question - buyer back out from a signed contract?

Posted by klose11 (My Page) on
Mon, Jun 24, 13 at 4:51

We are the buyer and this is a very hot market in the SF bay area. We already made offers many times and were not accepted. Our agent suggests we could make multiple offers simultaneously to increase our chance. So we follow her suggestion, made multiple offers to some properties we like and suddenly 2 of the sellers accepted our offer in the same day. we are now bound with 2 contracts. We like property A more so we withdraw our contract from property B.

Our contract includes a two-day contingency to review HOA documents (the only contingency we put in our offer) so our agent think we could legally cancel the contract without any penalty. But the selling agent of property B was very upset (obviously our offering price is much higher than other offers) and left a message saying he and his client intend to sue us for breaching the contract.

So my question, is it illegal to make multiple offer simultaneously? since we got a contingency in our contract, is there any standpoint for the seller to sue us?

Any comment would be appreciated!


Follow-Up Postings:

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RE: legal question - buyer back out from a signed contract?

Tell us exactly what the contingency says, otherwise, no one here can help much.


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RE: legal question - buyer back out from a signed contract?

I can only speak to what we are currently going through.

Our buyers backed out of their offer 2 days before closing. They claimed it was b/c of the interest rate. We knew that wasn't the reason, as the interest rate change only would have changed their payment $9!!! So, we called their bluff and offered to pay down the interest rate for them. They still walked. The only thing they may lose is their piddly earnest money.

My DH spoke with some real estate attorneys and said no judge will/wants to force someone to buy a house. Yes, we probably could sue them for the time this has taken our house off the market, inspection on the house we were buying (it was contingent on this one selling), etc, but honestly, I'm sick over the deal falling through and really just want to get the failed sale behind us and move onto getting it sold so that, hopefully, we can still save the house we have an offer on.


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RE: legal question - buyer back out from a signed contract?

If you had a contingency, and you retract before your contingency deadline, I am pretty sure you are fine. Here, there is a 3 day window you can walk for any reason (in Washington State); but, then often there are other contingencies built into contracts--inspection being most notable. At any point as long as you are acting within your contract timeline, you are good.

They signed the contract too. They agreed to your contingency to look over HOA documents, and withdraw prior to x date. If you did that, you should be good.


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RE: legal question - buyer back out from a signed contract?

Agree. You had two days to inspect the HOA documents. You didn't like what you saw in there. You informed the seller before the deadline. The contract is void.
How do they even know that you made an offer on another property?


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RE: legal question - buyer back out from a signed contract?

This is exactly why I won't do multiple offers for my buyer clients.


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RE: legal question - buyer back out from a signed contract?

For buyers who wish to submit multiple offers... in the offer, just :forget" to initial one page or something else small like that. That way, if more than one seller signs your offer, it is still not legally a binding contract until the initial is completed.
Our new contracts as of about 2 years ago uses a Due Diligence Period where the buyer can walk for any or no reason for this specified time. The buyer pays a small fee for this period of time. So I can submit several offers at once if I wanted too, w/o the fear that my buyer would be stuck in a contract w/o a way to back out cheaply.


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RE: legal question - buyer back out from a signed contract?

I have to say I find this more deceptive than using the contingency to walk away. Wouldn't want the seller to "forget" to initial something and then renege on a contract, just in case a back-up offer came up.


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RE: legal question - buyer back out from a signed contract?

Did we not learn anything from the RE market crash? No market is so hot that you shouldn't protect yourself with an inspection and financing contingency and if you have no extra cash, make sure you also include an appraisal contingency. There are plenty of people still sitting underwater on plenty of those "hot" properties. I know, I know, your market is different and special ... I'm in LA so we aren't too different, but I know a few that sold at a $1 mill loss and took the hit themselves. Buy now or be priced out forever ... we just saw how that mind set worked out terrible for lots of people. Buyer beware!


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RE: legal question - buyer back out from a signed contract?

"For buyers who wish to submit multiple offers... in the offer, just :forget" to initial one page or something else small like that. "

Not to mention this practice is unethical, deceptive and low. It is hard to believe that the seller's agent and lawyer would be so careless without reviewing the entire offer before asking the seller to sign.


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RE: legal question - buyer back out from a signed contract?

It may or may not be. I do not practice this, as our contracts have the Due Diligence Period that the buyer can back out for no reason.


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RE: legal question - buyer back out from a signed contract?

I have been the victim of tricks like this. we had a buyer sign a contract and then 4 days from closing backed out making false claims (which we could document and refute) saying we had to re wire the entire house to be up to code. although we could have taken them to court we did not feel we could afford to fight it and tie up the house and keep it off the market for the duration. It was unbelievably difficult and it makes me sick to think of it. we had already removed all our staging, furniture and all but my 4 days of personal items that I needed until closing. husband had taken everything up north to the new house already. we lost the prime 30 days the house should have been showing on the market, we had to buy all new items and re stage the house and then had the questions and rumors in the RE community as to why the sale fell through.. In my opinion it is a low and immoral thing to play games with other people's lives by such deceitful practices. if you don't intend to honor the contract, don't sign it! shameful.


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RE: legal question - buyer back out from a signed contract?

egbar - I am right there with you! As mentioned above, our buyers backed out 2 days before closing, for a "fake" reason that we agreed to deal with. What is the purpose of a contract if the buyer can just back out in the end? It was a RD loan, so it tied our house up for TWO months -at the hottest selling time. Argh!


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RE: legal question - buyer back out from a signed contract?

2 days before closing is VERY different from 2 days after signing a contract...


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RE: legal question - buyer back out from a signed contract?

Well, I once backed out of a contract after I saw the HOA documents. Even consulted an accountant who confirmed that the HOA was not in good financial shape. This was a few weeks after signing the contract because the seller took so long to hand over the documents. There may be other issues that a buyer doesn't like in the HOA documents, e.g. a weight limit on pets, an assessment, or whatever.


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RE: legal question - buyer back out from a signed contract?

Why people wants to accept an offer with "Due Diligence Period that the buyer can back out for no reason"?

A contract should spell out exact the issues that may cause cancellation of the contract, such as what kind of findings come out of this "Due Diligence Period". Putting a blank statement like this would keep door wide open, no one should accept this kind of offer.

Again, it is seller's agent, seller's lawyer and seller's responsibilities to come up a water tight ( or as water tight as possible) contract to protect seller's interest, and...seller agent's commission.


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RE: legal question - buyer back out from a signed contract?

Azmom,
The buyer writes out a check to the seller at contract execution, which is a negotiable amount of $. This dollar amount pays for the seller to take the home off the market for a predetermined amount of time, so that the buyer can perform his due diligence. If buyer backs out for any and/or no reason, the buyer keeps the due diligence fee. Same way most commercial deals are written up.
Doing a contract this way eliminates all of the arguments, legal cases and confusion from what systems and items that the seller needed to repair in order to make certain that the items are performing the function which intended for. In the old contract, if these items were not repaired, the buyer could walk and receive the deposit back.
With this new contract, all of this is moot. The buyer does his inspection, requests repairs if he wants, and the seller responds. If buyer does not like the sellers response, he has until the end of his due diligence period to either go on with the sale or back out and get his deposit back.


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RE: legal question - buyer back out from a signed contract?

ncrealestateguy,

OK.

Thank you for your explanation by adding the additional clause.

It makes the practice much more reasonable than your previous statement "uses a Due Diligence Period where the buyer can walk for any or no reason for this specified time".


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RE: legal question - buyer back out from a signed contract?

It took a while for agents to accept this new contract, but it really does clean up a contract... no more having to write up additional addendums or conditions or contingencies for every little unique situation the buyer may find... now all of that is encompassed via the due diligence period.
The biggest uncertainty when starting to transition to this new contract was that no one knew how to advise sellers on how much to ask for the due diligence fee. Our answer from the Commission was that the market will figure that out... and it has.


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