Q & A: Can Buyer Cancel a Contract Even with All Contingencies Removed?

Q: Doug, we just sold our home recently in Pleasanton. We did everything right – we got pre-sale inspections, filled out all of our disclosures, and provided potential buyers with all of the information they need to write an offer. We accepted an all-cash offer with no contingencies, but the next day the buyer canceled the sale before they put their deposit into escrow. Can they do that? Melinda in Pleasanton

 

A: Melinda I’m sure that was unwelcome news. Very disappointing to be sure. Can they cancel the contract? Sure. The better question is what remedies do you have as a seller. Unfortunately, since they did not put the good faith deposit into escrow, there are no funds to secure the offer. IF their deposit was in escrow, you would be in a stronger position and may have been able to make a claim or negotiate for part or all of the buyer’s deposit, depending on the circumstances. But since there is no deposit, you have limited practical options to enforce the contract. You may be able to take action against them on the basis of bad faith, but it would likely be expensive and a fairly long process. It is likely not practical for most sellers who want to get on with getting their homes sold.

 

In general the only remedy a buyer has to cancel a contract after they have removed all contingencies (or likewise make an offer with no contingencies) is if there is an additional disclosure of a material fact, in which case the buyer may be entitled to a 3 day right of recision. For example, if someone passes away in the house while you are in escrow, or if there is a defect not previously disclosed that surfaces after you are under contract, then the buyer likely has the legal right to cancel the agreement, even if they have removed all contingencies.

 

DISCLAIMER: You should ALWAYS consult an attorney for any legal issue, as they are qualified to give legal advice on your specific situation. Good luck!