To follow-up on last week’s Legal Tip, the housing market is generally experiencing an uptick in buyer cancellations. Here’s a quick checklist to help ensure that you are properly handling a buyer cancellation: 

1. Not So Fast!
Most buyers and sellers would prefer to make a deal work, rather than cancel. Before a buyer cancels, make sure you’ve explored and exhausted all viable options for keeping the deal together. You may be able to save a deal from falling apart by having one side agree to give the other side a monetary credit, an extension of time, or some other type of concession.

2. Be on the Alert.
Cancellations can be very difficult and stressful situations. Be careful what you say, and be prepared for tempers to flare and accusations to be lodged.

3. Properly Complete the Cancellation Form.
To do a cancellation, use the C.A.R. standard-form Cancellation of Contract (CC). If you are the buyer’s agent, your client typically cancels under the buyer’s contingencies. In that case, check the box “Buyer” in paragraph 1A of the CC. Then check the box for paragraph 1A(1) to indicate that the buyer is cancelling “As permitted by the good faith exercise of paragraph(s) ____ of the Agreement.” For the blank space provided, insert “14,” because paragraph 14 of the RPA addresses cancellations. You should generally refrain from pinning your own client down to a more specific reason for cancelling, as explained in last week’s Legal Tip.

As for page 2 of the CC, insert the escrow file number and escrow holder in paragraph 2C. Buyers cancelling under their contingencies will generally check the box in paragraph 2C(1) for the deposit to be returned to the buyer. The buyer should then sign the bottom of both page 1 and page 2 of the CC. Escrow will generally require the seller to counter-sign page 2 of the CC before the escrow holder will release the deposit to the buyer.

4. Keep Your Client Informed in Writing.
Occasionally we do run into difficulty getting the other side to sign the CC. Make sure that you keep your own client abreast of all developments, preferably in writing. Also make sure to attribute a source for any updates you give to your client. For example, saying “the listing agent said that the seller will sign the cancellation today,” if true, may be a better way for you as the buyer’s agent to update your buyer-client as compared to just saying “the seller will sign the cancellation today.”

Copyright© 2023 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 October 23, 2023. 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. Written by Stella Ling, Esq.