Dear Real Estate Adviser,
We are dealing with home sellers who want to insert a clause in the contract that basically says they can terminate the agreement for any reason before closing. Can they do that? I’m looking for legal authority for an answer but am having trouble finding anything that says that such a clause is or isn’t allowed.
I am not a legal authority, but yes, sellers can try to insert such an at-whim cancellation provision in the sales contract if you let them. There is no law against it. In non-real estate deals, there’s a name for this sort of unconditional right to cancel: “termination for convenience.” In residential real estate, there’s a different name for it: “a huge waste of time.”
Do they really want to sell the house?
Knowing that the rug can be pulled out from under your purchase for any reason at any time immediately puts you in a compromising position should you acquiesce to that demand. Typically, these types of folks aren’t serious sellers anyway. They tend to be a “we’ll just see how we feel” breed who aren’t sure they can bring themselves to actually sell home sweet home.
How about just backing out?
Unless you’re absolutely dead set on possibly getting this house, it might be time to consider, to quote the movie “Fargo,” “fleeing the interview.” Even if the buyers agree to change that contract stipulation just to appease you, the advice remains the same. They’ve already established they’re wishy-washy and you can’t trust they won’t go looking for a different loophole should a case of cold feet set in. Why bother hiring an inspector or putting up good earnest money that could otherwise be used to hold the home of a more serious seller? Further, why try to coordinate the sale of your current home with a “sorta-maybe” replacement?
Protect yourself from flaky sellers
However, if this grandiose house is the ultimate find and you deem it worth taking a shot on anyway because time isn’t a huge issue for you, make sure you at least build in a few safeguards. Insist on clear contract language that you’ll be compensated for the cost of inspections, loan applications and other expenses you incur related to the transaction. First though, ask your agent (you seem to need one in this instance) to try to find out from the buyer’s broker what’s really behind this whole unconditional-right-to-cancel thing. The buyer may have had a previous bad experience that you can reconcile to some degree with other contractual assurances.
Before you go this still-shaky route, though, know there are other downsides to allowing carte blanche termination rights. You may be so afraid of offending the seller that you will be shy about requesting needed repairs or repair credits. You may overpay. You may be given verbal assurances that string you along but find you have no grounds to sue for “specific performance” with that unconditional cancellation clause hanging there like a dangling participle.
Best bet? Move on. Let these weak-kneed “sellers” tie up someone else’s time and money. Good luck!
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