Question: I am the buyer’s agent. We are writing an offer using the C.A.R. Contingency for Sale of Buyer’s Property (COP). We plan to check the very last box of the COP, so that, for the entire duration of the agreement, the sellers cannot cancel on us even if they accept a backup buyer. That also means that the sellers have no other right to cancel under the COP, correct? 

Answer: No, that’s wrong. As background, paragraph 8 of the COP gives a seller a possible right to cancel if the seller accepts a backup offer, and then serves the buyer in first position with a 3-day notice to do 3 things: (1) Remove the sale contingency; (2) Remove the loan contingency; and (3) Provide proof of sufficient funds to close escrow without selling the buyer’s home. If the buyer does all 3 things, the contract moves forward. If the buyer fails to do those 3 things within 3 days, the seller can cancel. This possible right for the seller to cancel upon accepting a backup buyer can begin at contract acceptance (by default); 17 or another number of days after acceptance (by checking paragraph 8B and inserting a number in the blank space); or not at all (by checking both paragraphs 8B and 8B(ii)).

Even if paragraph 8 does not apply (because both paragraphs 8B and 8B(ii) are checked), the seller may still be able to cancel under other provisions of the COP. These other rights to cancel are all neatly laid out in paragraph 5 of the COP. They all depend on the status of the sale of the buyer’s existing home as follows:

1. If the buyer’s existing home is in escrow at contract acceptance, the buyer has 5 days to give the seller proof of that escrow. If the buyer fails to do that, the seller can cancel after serving a NBP (paragraph 5B).
2. If the buyer’s existing home is not in escrow at contract acceptance, the buyer has 17 days to enter into escrow and give the seller proof of that escrow. If the buyer fails to do that, the seller can cancel after serving a NBP (paragraph 5B).
3. If the buyer’s existing home fails to close escrow in a timely manner depending on how paragraph 1 is completed, the seller can cancel after serving a NBP as specified (paragraph 5A).
4. If the buyer’s existing home closes escrow depending on how paragraph 1 is completed, the buyer has 2 days to provide the seller with proof of closing. If the buyer fails to do that, the seller can cancel after serving a NBP (paragraph 5A).
5. If the buyer’s existing home falls out of escrow, the buyer must notify the seller, and the seller can cancel (paragraph 5C).

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 May 29, 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.