Can I cancel the contract if the seller won’t make repairs?
06/17/2014 | Author: TAR Legal Staff
A seller and I entered into a contract that included a termination-option period. I hired an inspector who completed the inspection during the option period and found a few things that I asked the seller to repair. The seller refused to agree to make any repairs, and now the option period has expired. Can I get out of the contract?
No. A buyer purchases a property as is (in its present condition) when the contract is executed unless he has requested that the seller complete certain repairs in his offer and the seller has agreed to those repairs. If the seller refuses to sign an amendment to make the buyer’s requested repairs, the buyer must terminate the contract during the option period or else the parties will proceed with the contract as originally agreed.
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@Rhonda—- Your proposed situation is quite curious. I have never heard of an agreement where the seller would make repairs AFTER closing! How can you hold the seller’s feet to the fire after all money has changed hands at closing?
Any contract requiring that repairs need to be done should either specify what is to be done prior to closing, or have the seller pay the buyer for the amount needed to make the repairs. (The best way to do that is to put it in Paragraph 12 as a contribution to the buyer’s closing costs. ...And don’t talk about ‘repairs’ anymore.)
If there was an Agent involved, you should make your demands known to the agent. Then if you get no response, go and hire a attorney immediately. The contract will be evaluated, and then you may ask the attorney to evaluate the agent’s behavior. You could have a claim against the Brokerage.
Why do agents put such things into a contract? ...It would seem that the agent could have given the buyer better advice before the contract terms were negotiated. They need to go back to class…
Well doesn’t mention is in AS IS condition. Is it?
I’m not giving legal advice…but I sure would seek it. It also seems like the other agent should have been acting as an intermediary, that’s if I understood your comment correctly. If he or she is a REALTOR, I think they need to brush up on the Code of Ethics!!!
What do you do in cases where the Seller has agreed to do repairs and eight months after closing repairs are still incomplete? She is informing the buyer that she is no longer able to do repairs and refers you to the home warranty insurance for you to file a claim? Furthermore, the agent was the buyer agent\seller’s agent. Feeling caught between a rock and a hard place. Where do I go from here. Get a attorney. Please advise.
The answers are good, but we seem to have missed one very important aspect of the question. Although the example is not specific, the question implies that a buyer used a TREC contract, and therefore had an agent “representing” him or her.
~So what happened to this agent’s responsibility to advise the buyer to terminate the contract DURING the Option Period…?? You can’t just sit on your hands when the seller refuses to make the repairs that you have requested. The seller may have done that on purpose, thinking that they came down far enough on the sales price to allow the buyer to make their own repairs, if desired. Or the seller may be wise enough to realize that the contract says that the buyer has agreed to buy the property “as is”. Any time you go back and ask for the seller to spend money on repairs after executing the contract, you are basically RE-negotiating the terms of the contract. The seller is not obligated to do anything at that point, and the buyers, and their agent, have to be prepared to file a notice of termination DURING the Option Period. Sometimes I will file a notice of “Intent to Terminate” early in the Option Period, just so the seller knows what the buyer will do if no repairs are agreed to.
It is certainly possible that a buyer could conduct an inspection of the property even before negotiating the terms of a contract. And then all expectations of the seller would be on the table. Let me ask a question: Why don’t we have a form that gets the seller to agree not to enter into negotiations with another buyer until the first buyer has a chance to conduct an inspection? (It would be like having an Option Period without previously negotiating the sales price.) ...Seems to me that this would put both parties on a level plain, and isn’t that what “treating all parties fairly” is all about…??
>Sorry; that was another discussion on another page.
Okay, the question was “can I get out of the contract?”. I’m certainly not going to dispute a TAR Attorney and in the context of the paragraph, the answer is absolutely correct. The Buyer does NOT get the Option Money back for any reason, that’s the whole point of it.
Now, if you look at the contract in a whole, the buyer still needs to qualify for their loan, if any, the property still needs to be approved by lender (appraisal, etc) Title Commitment needs to be able to be cured if there are problems (IRS Tax Liens, Probate, back property taxes), let’s hope if there is a structure, it’s not built over the property line, the septic tank isn’t on the next door neighbors property or if this occurs it can be purchased or a property line agreement be reached. If all of those problems are either not problems or can be remedied prior to closing, either party may still “get out” of the contract, but they risk being sued for specific performance, AFTER they have gone through mediation. At least that’s what the contract used to say.
Jay Warren, I hate to dispute your comment, but it deserves it! The question was can the buyer “get out of the contract” after the expiration of the option period? The answer is NO, unless the parties agree to cancel the contract in writing! If a buyer stops performing under the terms of a contract, after the termination option has expired, the buyer is in DEFAULT and can be sued for specific performance. While it is likely the seller will not recover much in the way of damages, other than the earnest money deposit, this fact alone does not make DEFAULT allowable with only the fear of loss of earnest money. If the seller so desires and pursues heavily enough, they could gain a judgment for up to three times the actual damages caused by their DEFAULT plus costs. Abstract the judgment, and the buyer may have trouble purchasing another property, especially if they are using a home loan to purchase with. The buyer’s lender may check credit of the buyer again the morning of closing just to make sure nothing has changed.
The above answer is actually incorrect, the Buyer may terminate outside of option period, they will just forfeit their earnest monies.
Does the buyer get back the money after the option period expires and proceeds to closing?
It can be refunded by being credited to the sales price at closing which in effect would be refunding it to the buyer.
It bears noting that the Option Fee is NON-REFUNDABLE. Way too many agents out there thinking that their buyer can terminate AND get the Option Fee refunded. The buyer BUYS the option period from the seller - NO REFUNDS.
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