Seller’s Replacement Property Contingency

September 18th, 2017 at 11:32 am

Question: We seem to be getting more sales lately that are contingent upon the Seller’s Purchase of Replacement Property (C.A.R. Form SPRP). The SPRP form has 2 contingencies. One for “Finding a Replacement Property” and another for “Closing Replacement Property.” Let’s say that a seller has both contingencies when entering into a contract to sell Property X. The seller finds Property Y as a replacement property, and removes the Finding Replacement Property contingency in writing. But the purchase of Property Y falls through, and the seller enters into a contract to buy Property Z instead. If the purchase of Property Z doesn’t come together in time for closing the sale on Property X, can the seller cancel under the Closing Replacement Property contingency?

Answer: Yes, most likely. Nothing in the SPRP requires that the replacement property acquired under the Finding Replacement Property contingency (Property Y) be the same property as the one under the Closing Replacement Property contingency (Property Z). Also, when the purchase of Property Y fell through, the seller could have cancelled under the Closing Replacement Property contingency anyway, regardless of Property Z. The answer may be different if the buyer can show that the seller acted in bad faith, but nothing in this particular scenario indicated any dishonesty or unfair dealing. Buyers’ agents should take heed. Any sales transaction with a Closing Replacement Property contingency gives sellers broad latitude to cancel.

Copyright© 2017 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 September 18, 2017. 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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