October 5th, 2020 at 2:20 pm
Multiple Choice Question: Can the buyer cancel without the seller claiming an entitlement to the buyer’s deposit? Pick the best answer:
A. Yes, if the buyer hasn’t submitted his good faith deposit into escrow yet.
B. Yes, because the buyer can cancel under his contingencies.
C. Yes, if the buyer doesn’t tell the seller that’s the reason for cancelling.
D. No, because the buyer’s reason for cancelling has nothing to do with the house.
Answer: Answer A is wrong. Some agents mistakenly believe that a buyer and seller have not entered into a valid contract unless the buyer submits a deposit into escrow. Not only is that wrong, but nothing in the C.A.R. Residential Purchase Agreement (RPA) allows a buyer to cancel if the buyer has not submitted his deposit into escrow yet.
Both Answers B and C are good answers, but I tend to think that Answer C is the best answer. As stated in Answer B, the RPA allows the buyer to cancel under his contingencies. However, if the buyer were to tell the seller that the buyer is cancelling because he found a new job, the seller is likely to get upset and claim an entitlement to the buyer’s deposit. As stated in Answer D, the seller may argue that the buyer does not have the right to cancel under his inspection contingency and other contingencies for a reason that has nothing to do with the house itself.
Yet, as alluded to in Answer C, the RPA does not require a buyer to give the seller a specific reason for cancelling. I am not giving you or the buyer permission to deceive the seller. I’m just pointing out that the buyer does not need to be pinned down to one reason for cancelling. After all, if given the opportunity to elaborate, surely the buyer would explain that he’s also cancelling because of the house, e.g. the house is too far away for him to commute, the purchase price is too much for what he’s getting under the circumstances, and the condition of the property is not good enough for him to proceed with the purchase.
-Many thanks for suggesting this week’s legal tip goes to Chris Fryson (San Diego Central and La Mesa / El Cajon Manager).
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