July 27th, 2018 at 5:02 pm

Question: I am the listing agent in a pending sales transaction. All of the buyer’s contingency timeframes have expired. The sellers have now received an outstanding backup offer. The sellers understand that, if they serve the existing buyer with a Notice to Buyer to Perform to remove all contingencies, the buyer may remove all contingencies and the sellers will not be able to cancel. The sellers have nevertheless asked me to do whatever I can to help them cancel. With that in mind, can you go over all the steps with me? 

Answer: Of course. Here are the main things to consider when serving a Notice to Buyer to Perform (NBP) in hopes of cancelling the agreement:

1. Sellers’ Disclosures: Make sure that the sellers have provided the buyer with all reports, disclosures, and information for which they are responsible.

2. Notice to Perform: Properly complete all the blank spaces in the Notice to Buyer to Perform and have all sellers sign it.

3. Day of Service: If applicable, ask the sellers to consider timing the service of the NBP so the buyer has the minimum number of days required by contract to remove contingencies. For example, instead of serving a 2-day NBP on a Thursday or Friday, the sellers may want to wait until Saturday because, regardless of whether the NBP is served on a Thursday, Friday, or Saturday, the buyer will have until 11:59 p.m. of the following Monday to remove contingencies (barring any legal holidays).

4. Time of Service: Ask the sellers to consider serving the NBP at the end of the day, again to give the buyer the minimum amount of time required by contract to remove contingencies.

5. Personal Delivery: If at all possible, personally deliver or have someone personally deliver the completed and signed NBP to the buyer’s agent. Proper delivery of a NBP requires personal receipt by the buyer’s agent under paragraph 30.I. of the RPA. Delivering the notice to the office of the buyer’s agent is not as good as personal delivery to the buyer’s agent.

6. Confirm Receipt: If you do not personally deliver the NBP into the hands of the buyer’s agent, make sure you call him or her to confirm receipt.

7. Cancel Immediately: If the buyer fails to remove contingencies by 11:59 p.m. on the last day to perform, the seller should cancel at 12:00:01 a.m. of the next day. Otherwise, the buyer could still remove contingencies before the sellers cancel (see paragraph 14B(4) of the RPA).

8. Obtain Mutual Cancellation: To be safe, make sure that the buyer signs and submits the Cancellation of Contract and that escrow is fully cancelled before the sellers enter into a regular contract with the backup buyer. Otherwise, use a Backup Offer Addendum for the backup buyer.

-Thank you to Beth Goodman (Santa Barbara Office) for suggesting this week’s legal tip.

Copyright© 2018 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of July 27, 2018. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.

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