release of contract questions

**waterfront** · 02-03-2008, 05:02 AM

Hi, all.

I have a house that is undercontract (it's in Maryland) and the buyer(s) wants to release themselves. I have some questions.

The buyer offered on the 25th. We countered on the 26th. The buyers agent had them sign/accept all changes on the 28th. However, the agent did not fax the pages back to me until the 31st, after i informed her we are not undercontract until she delivers them to me, per our contract.

On the 2nd, i get an email from her stating they want to back out (Ms. Buyer had surgery in the midst of the negotiations and it did not go well. She got a call and her father is dying in China. Her husband wants to escort her back, so they want a release of contract.) She's going to have them sign one on the 3rd.

Question 1: does the three day cancellation law apply to real estate? I know it does for mortgages, but i want to confirm that they may be within that cancellation period.

Question 2: i am not a heartless person, but i have my doubts about the health and travel issues here. I have a sneaking suspicion that they feel they overpaid and that the market is dropping and they can get a better deal elsewhere/later...but that is really just an unsubstantiated suspicion. do i pursue the earnest money (9K) or let it go?

Any experiences you can share will help.

Best, Waterfront

**RobM** · 02-03-2008, 09:11 AM

Real Estate laws are diffent in every state. For example, in FL, the contract is not considered executed until it is signed by all parties and delivered via email, fax, or in person to the other party (the realtor is acceptable as the other part). At that point, there is a legally binding contract...escrow money does not have to be apart of the agreement, but if the contract states that there is a transfer of money into escrow, if that does not occur, the contract is null and void. In your case, I do not believe that your state has any such right of recision law for real estate transactions (have never heard of this in any state)...but you may want to call your local board legal hotline or talk to your broker about what the rights are of the seller.

On the other hand, if you tie this up in litigation, you can not sell the property until this is resolved due to the litigation...no one will want to get involved in something that they may not be able to buy in the long run, or that may not be available until a long time from now.

just my 2 cents

**TomAnto** · 02-03-2008, 11:56 AM

It is a common misconception that earnest money is to be used as a punitive remedy for backing out of a real estate contract. Rather, it is supposed to make the injured party whole. It is to be used to cover the seller's expenses in the event that a buyer defaults on the contract. Namely, agent fees, lawyer fees, tests, inspections and so forth.

Some have argued successfully that the earnest money is to cover the spread in a declining market. This is particularly difficult to prove when the seller contracts with another party shortly afterwords. If there is no difference in the contract price between the new buyer the old then obviously the argument fails. If this were income property there could be other remedies available.

Rob is right. You are probably better off getting the property back on the market quickly rather than tying it up in litigation.

**waterfront** · 02-03-2008, 12:32 PM

TomAnto and Rob-

Thanks for your replies. Very interesting. In this case we are clearly undercontract as of their faxed page acceptance date. This is per the contract language. So that much is abundantly clear.

I actually do more commercial work than residential, and in that world, deposit money is clearly identified when it is at risk and dependent upon performance. In some senses, commercial real estate is simpler...it can certainly be more clear.

In the MD regional contract, there is no place for a date that the contract goes hard...which i found odd at the time of writing the contract, but didn't think would be an issue (hah! famous last words!). It is there in the District of Columbia general contracts. Hence my question about 3 day contract cancellation.

Yet, earnest money is never clear. Per the contract it states if the buyer (or seller for that matter) does not perform, the earnest deposit is distributed by the the broker in accordance with Maryland law. I read the law, and it leaves it up to the buyers broker to decided who gets what. And this this case, by TomAnto, it would probably be no harm, no foul...buyer gets thier money back in toto.

Believe me, litigation is 99% of the time just plain stupid. I've been there for a variety of construction matters. I would never let this go down that path.

However, i'm not into agents telling me what to have my clients do...this has been a slow-moving, difficult transaction, much of it due to the buyers agent. I try very hard to treat people like I would like to have them treat me, but right now it's really very,very hard.

I think i need to go do some yoga, meditate, drink some hot tea...accept they are telling me the truth and have my seller release them without delay. This may take me a few hours to get to that level of acceptance, if you know what i mean.

Thanks again,

waterfront