Vail Daily column: Can I back out of home sale?
October 21, 2013
I am a seller with my house under contract and I am starting to have second thoughts. I reluctantly came down to a price the buyer offered, but now I think I am selling too low. I am hoping the buyer will back out because of the inspection or appraisal — or anything really. However, if the buyer goes forward, I may decide not to go through with it. What, if any, are the consequences if the buyers, or I back out of the deal?
Dear "Second Thoughts,"
It is normal to have second thoughts about selling a property. However, it is best to have those thoughts before signing a sales contract. If you are seriously thinking of defaulting on your contract, you should contact your attorney immediately.
In the standard Colorado Real Estate Commission contract (http://goo.gl/qYXYIz), all sellers are subject to "specific performance" and can be legally forced to go forward with the sale and/or be subject to paying damages to the buyer for their time, expenses and legal fees (see Paragraph 21.2). After you speak to your attorney, you may decide it is best for you to go ahead and sell. You can always work with a good buyer's broker to find another investment that will maximize your proceeds and help mitigate what you feel as a loss.
If the buyers would decide to exercise their right to terminate, and they qualify to receive their earnest money back under the dates and conditions in the contract, then the contract just terminates, the earnest money is returned to the buyers and both parties go their separate ways.
In the case of "buyer default," meaning all the contingency dates are past and the buyer chooses not to or refuses to close on the property, you may only have one option and that is limited to "liquidated damages," unless the specific performance box in Paragraph 2.1.1. is checked. Liquidated damages means you can retain the buyers' earnest money but not force them to purchase your property nor can you collect damages.
You will need to refer to your listing contract at this point, because the standard Colorado Real Estate Commission listing form (http://goo.gl/H71SCU) has a Paragraph 19 that says you will split the earnest money with your broker, not to exceed what the commission would have been. If you have not already done so, then you need to discuss this clause with your listing broker. In your case, buyer termination or default could be a relief if you continue to feel that you truly don't want to sell at this price. Once again, I strongly advise seeking legal counsel and discussing your situation with your listing broker. Best of luck to you with this and your future investments.
Joan Harned is an owner-broker for Keller Williams Mountain Properties and heads up Team Black Bear, her own real estate team. Harned has been selling real estate in Eagle County for 27 years, is a past chairman of the Vail Board of Realtors, past Realtor of the Year, past director on the Great Outdoors Colorado Board and a member of the Luxury and Land Institutes. Contact Harned with your real estate questions at firstname.lastname@example.org, 970-337-7777 or http://www.skiandteehomes.com.