BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
SELLER REFUSES TO SELL
Q: I am a buyer's agent and now that my buyer has removed all contingencies and we are one week from close of escrow, the listing agent has informed me that the seller now does not want to sell. Seller apparently has had a change of heart because her family does not want her to sell. Seller is offering to pay my buyers the costs of their expenses of inspections and obtaining the loan in exchange for cancelling the contract. But, in any event, seller refuses to sign closing papers. My buyer wants the property. What do we do?
A: This situation is exactly the reason why we have written contracts. Parties to a transaction cannot simply change their minds about selling or buying without breaching the contract.
See Weekly Practice Tip: “Bad Faith”
A seller who breaches a contract by failing or refusing to sell will be liable to the buyer for damages. And, in addition, the buyer may well be entitled to Specific Performance, a remedy where the court orders the sale of the property to the buyer. The attorney for the buyer may also record a lis pendens against the property, prohibiting the sale to any other buyer. Finally, the buyer would also likely be entitled to recover attorney’s fees and costs against the seller under the attorney fees provision of the purchase agreement.
PRACTICE TIPS:
LISTING AGENTS:
1. If your seller is refusing to close when there is no apparent contractual or legal right to do so, advise your seller to consult with a qualified California real estate attorney.
2. Whether a party has breached the contract is a fact-based determination and a legal conclusion; and agents can’t give legal advice. So your advice to the seller could be something like:
“I am not an attorney, and I can’t give you legal advice, but my experience as an agent is that if a seller doesn’t have a valid contractual or legal reason for cancelling that seller would be in breach of the contract and could be liable to the buyer for damages and even attorney’s fees. For that reason, I strongly recommend that you consult with a qualified California real estate attorney before you proceed.”
See Weekly Practice Tip: “How Not to Practice Law”
BUYER AGENTS:
3. Refer your buyer to a qualified California real estate attorney who will likely send a letter to the seller advising that if the seller does not close per the terms of the purchase agreement, buyer will sue for specific performance, record a lis pendens, and seek recovery for damages and attorney’s fees.
4. From there, the attorney, and the stubbornness of the seller, will dictate the course of events, but often sellers, faced with having to hire an attorney, will come to their senses and allow the sale to proceed.
DUAL AGENTS
5. Remember if you are a dual agent (either single-agent/dual agent or two agents in the same brokerage representing the parties), you have equal fiduciary duties to both. Do not take sides. While you can try to mediate or negotiate a resolution, it is important to not take sides or take a position to the detriment of the other party represented by you or your brokerage.
See Weekly Practice Tip: “Dual Agency Issues
DO NOT FORWARD TO CLIENTS. Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.