Profile picture for caroleyang

What is max loss can a buyer get if backing out from the contract (after removing contingency)

I recently bought a house in fremont, CA and it is past the inspection contingency (no loan contingency).   I'd like to back out from the deal because i am not satisfied with my agent. 

My agent was incompetent.  I didn't want to remove contingency until seller sign a rentback agreement with sooner moveout date.  he had me sign both rentback agreement and remove contingency agreement and sent to seller agent.  Therefore, of course, seller agent just signed the one they like (remove contingency) and didn't sign my rent back agreement.  I was really disappointed about that.   And he made mistakes all the time, such as telling me the wrong escrow date even if I questioned a few times.   He made a few mistake with rent back agreements, and etc.  


Therefore, I decide to cancel my contract.  I'd like to know what is my max loss if walking out of a contract.   Is it the earnest money desposit only?   He told me that not only i will lose my deposit, but also seller broker and his broker company will sue me for breaching contract.  Moreover, seller will charge me in addtion to deposit to cover their loss.    I really doubt about his statement.  It's possible that I will lose all my desposit.   How can i lose more than that when contract didn't mention what other is there to lose?


I look forward to your reply.   Thanks,



c.l

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July 09 2011 - Niles
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Answers (11)

Get a free consultation from a Real Estate attorney. Do not sign a cancellation without getting your ernest money deposit back. The inspection cost is gone but you could get your ernest money deposit back. You could sue and put a cloud on title so they could not sell to anyone without settleing with you. I would speak to the brokers of each office to see what can be done without the legal avenues. Small claims judges always give the buyers there earnest money deposits back entirely or atleast half. I or my other half whom is a real estate broker and I was an agent before have never lost earnest money deposits. I have heard of others going to small claims and getting it settled tho if the brokers don't get it done. Time is of the essence of resolving this issue. Good luck.
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July 15 2011
First, let me repeat what everyone else has said. You need to talk to a lawyer. I'm not a lawyer, so I can't provide legal advice. Anything I say below is, therefore, not legal advice. OK?

While the Realtor Code of Ethics doesn't permit me (or another Realtor) from interfering with your relationship with your Realtor, it does appear that not everything was handled as well as it could be. Based on what you've presented, there are some question marks. OK?

Having said that . . . ummm . . . you've really messed things up. First, you signed both of those contingencies--the rent-back and the inspection one. They're not obviously linked or related. They're two entirely separate issues, with two entirely separate sets of issues. If you'd wanted the two to be somehow linked, you shouldn't have signed the two separate ones. I don't blame the sellers for signing the one they liked and not signing the one they didn't.

Next, you're cutting off your nose to spite your face. You want to cancel the entire transaction because you think that your agent made some mistakes? You may somehow think you're punishing the agent--and, OK, he'll lose the commission. But you're putting yourself through a lot more agony and a lot more financial exposure.

That brings me to the question you asked about how much more you can lose than your deposit. Again, I'm not a lawyer, so this isn't legal advice. My non-legal answer: A whole lot more. If the sellers incur additional expenses as a result of you dropping out, they might decide to come after you for those expenses. Your agent might come after you for his lost commission. Read your buyer's agreement closely. And even if you prevail in these and other problems, what about the cost of your lawyer? Maybe $175-$250 an hour. Or more.

In your comment, you mention the "concession of the commission." Are you asking for some money back from the listing agent? Sorry, but that's none of your business. You have no right to that. The seller and the listing agent agreed on a commission. That's their agreement. You're not a party to it. Some of that commission will be share with your agent. That's laid out in your buyer's agreement. Unless you negotiated something with your agent and it's stated in the buyer's agreement, you have no foundation for your claim. What's worse, in many states (though I don't know about California) such a commission rebate is illegal.

As for your observation that a contract can be modified after it's agreed to: That's true so long as both parties agree. It appears that the sellers agreed to your original contract, and that they signed the inspection contingency . . . which you'd also agreed to. It's just that they didn't agree to that separate and totally unrelated rent-back provision. Again, that's not legal advice; I'm not a lawyer.

I doubt you're going to get any farther--based on the answers here thus far--without involving a lawyer.
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July 09 2011
"I don't understand why it is wrong  require rentback agreement to be signed before I removed my inspection contingency?"

It wouldn't be a problem here in AZ to remove the home inspection contingency subject to the seller agreeing to the terms of the "rentback" agreement.
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July 09 2011

I would get together with the brokers and sit down with the agent present and get the facts. Get a feel for where they are coming from. I would get some legal advise before making a mistaken decision.
Thanks
Suzie Marquardt
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July 09 2011
Profile picture for Michael Helton

@Ryan Cook: I agree with the idea of having both parties sign an agreement of expectations or some sort of doc that prevents confusion (to protect the Realtor AND the buyer/seller).

@caroleyang: I am going to be blunt: You signed the contract. 

No one twisted your arm.  Even if the Realtor is as incompetant as you say (and you may have legal recourse against them) it is up to you to ask questions and understand everything before you sign it.  Why did you sign a contract which clearly did not have the rent-back agreement?

Although I could care less about the Realtor getting their inflated commission here, it is not fair to the seller if you just back out at the last minute.  They chose your contract (maybe over other contracts) based upon what you had in the contract.  If you had the rent-back in the original offer they may have decided to go with a different offer. 

Go talk to an attorney on Monday.

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July 09 2011
Profile picture for caroleyang
I am sure there is no lending contingency.   My loan seem to be approved.  

I already talked to their broker.  Strangely they repeat the same theory.  A contract is made and it can't be changed.   Remove inspection contingency has nothing to do with rent back agreement.     I don't understand why it is wrong  require rentback agreement to be signed before I removed my inspection contingency?  If they can't accept the new term of the rentback agreement, they can walk out of the deal too.   What is the problem?  What damamge will that incur to them? 

Also why do we need to have this rentback agreement, why can't add addendum or amendment to the contract before contingency removal?  Once contract is signed by both parties, can that be amended before anyone's contingency is removed?   I was hoping to amend the contract with sooner moveout date.  If seller don't like, then it is a deal breaker.  No one need to be liable for that.   What is wrong with my thinking?  Is it true that once contract is active, you can't change it?  It does not sound right to me?

The broker also don't care about giving concession of comission to us either.  They just say they will pass the message to the agent and let him decide.   It does not seem that broker care about my complain about agent's incompetence. 

One other thing to note is that my agent even said personal attack word to me yesterday.  The end result is that broker send someone else to work with me.  And that is about it.  They didn't do anything to keep me happy.

I do want to consult with real estate attorney.  But it is weekend.  No one is around.
My COE is coming Wed.  I am not sure how much time i got to sort out everything.   I don't have strong opinion about the house.  But i do worry moving to there is reminiscent of this bad experience.

Let me know what your thought is.

Thanks,
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July 09 2011
caroleyang - Every state is different and you are asking for some legal advice here, which we cannot provide.  You need to consult your real estate attorney for legal advice here.

A few things - If you decide to back out of a contract for no reason other than because you feel your Realtor is incompetent, you more than likely will lose your deposit and you could potentially be sued for breach of contract by the Seller.  You will have caused a potential loss for the seller as their home has been "off the market" while you all moved towards closing.  If you have a good real estate attorney, he/she would normally add their choice of language to limit any potential loss (the attorneys I work with always put in language to the affect of your deposit is the other parties sole recourse...check your P&S).

Also, if you feel your Realtor was that incompetent, I would recommend you make an appointment to speak with his/her broker.  Realize that one bad seed can besmirch that broker's reputation and potentially cause harm to all of the agents in that office...and we all know that means it could affect the brokers ability to earn.

One final comment in regards to @MichaelHelton's comment in regards to "standard" contracts with Realtors - you have a very solid point.  The reality is that most Buyer Contracts aren't worth the paper they're written on.  It is my opinion that having the client sign the contract is important, at least in MA, as it clearly states how the Realtor is to work for the client and what protections are available to the client.

Realtors should make it a point to tell clients that if they're unhappy with the services that the client will not be held to any contract...they can cancel at any time.  They have to realize that the Realtor should be working for them in their best interest.  If they feel their Realtor is not, then they're not connecting and they should work with somebody else.  The client should be pleased with the entire process of the transaction.  Most good Realtors that I know work in this manner.  If we don't earn the client's trust, fat chance we'll see any repeat or referral business.
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July 09 2011
Profile picture for Michael Helton
This is exactly why I would never sign one of these "standard" contracts with a Realtor...they are too heavily biased against you.  You sign an agreement to pay them their commission for their services when the sale is concluded and nothing more.

caroleyang, and you SURE there is no lending contingency?  I mean, what if you proceed with the sale but just cannot find a lender?  What are they going to do, force you to take a loan?  

I would side with Sharon and suggest you go see a Real Estate attorney immediately.  It will be a couple hundred dollars well spent.
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July 09 2011
The way it sounds to me is that in exchange for a rent back agreement from the seller you would accept the home in it's current condition without repairs and remove the inspection contingency. If that's true, your agent didn't properly present those terms to the seller because one thing couldn't happen without the other.

If you still like the house, I'd suggest proceeding to close escrow. You may be able to recover any loss that is the result of your agent's alleged incompetence. If you can convince the agent's broker of your potential loss in advance of the closing, the broker may be willing to pay a portion of their commission towards your closing costs to avoid any litigation.
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July 09 2011
Profile picture for caroleyang

All I know is that contract Term 25 (page 7) stated about possibility of losing initial deposit as penalty.   I don't see any other penalty for "breach of contract" being documented in the contract.  

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July 09 2011

Realtors are not allowed to interfere with your relationship with your agent. You need to consult an attorney to see if you can do anything here.
I think your agent is right, you can be sued for 'breach of contract' .
Be very careful about what you do here. You signed that contract agreeing to what was written there.

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July 09 2011
 
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