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I have a question about cancellation of a California real…

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I have a question about cancellation of a California real estate purchase contract. What are my risks as buyer if I cancel the contract after the contingency period?

Lawyer's Assistant: What steps have you taken so far? Have you prepared or filed any paperwork?

We have all signed the contract. Close of escrow is set for the 20th. No contingencies remain. There was a lien on the title which was cleared, but I remain uneasy.

Lawyer's Assistant: Have you talked to a CA lawyer about this?

No, I have not had a chance yet.

Lawyer's Assistant: Anything else you want the lawyer to know before I connect you?

The contract is a standard CAR form.

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Answered in 4 minutes by:
3/19/2018
Ray
Ray, Lawyer
Category: Real Estate Law
Satisfied Customers: 46,447
Experience: Texas Attorney for 30 years dealing in real estate
Verified

Hi and welcome to JA. Ray here to help you today.Please bear with me a few moments while I review your question, conduct and prepare your response.

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If the buyer defaults, generally the seller has three alternative remedies:

  • Keep the earnest money deposit. A potential buyer who signs a real estate contract generally gives the title attorney or the real estate agent between 5 and 10 percent of the purchase price. This is referred to as the “earnest money deposit”. It is a show of good faith on the part of the buyer that they are serious in wanting to purchase the property in question. A seller would like 100 percent of the purchase price as this deposit, while a buyer would only like to sign a promissory note and shake hands with the seller.

    However, the general practice is that the buyer will put up some agreed upon percentage of the sales price as this deposit.

    In the event of a default, the seller has the right to keep this deposit, and put the house back on the market and resell it. However, the person holding this deposit is called the “escrow agent”. This agent does not have the unilateral right to release the deposit – to either buyer or seller – unless there is a written statement from both buyer and seller authorizing the release or – if the matter has to go to Court -- a court settlement agreement or a Court order.

  • Sue for specific performance: There is a legal right for the seller to file suit against the buyer, asking the Judge to order that the buyer actually go to closing. This is known as an action for specific performance. Legal actions take time and are expensive. But if the buyer is financially able – and for example if the property values has declined – this is a possible alternative for the seller to consinder.

     

  • Bring a lawsuit for damages: Let us assume that the sales contract called for a $500,000 purchase price. After the buyer defaulted, the seller was only able to sell the property for $400,000. The seller has the right to file a lawsuit against the buyer for this $100,000 loss. Damages would also include any carrying costs which the seller had to absorb until the property was in fact sold to someone else..

You can offer the seller the earnest money here in return for written release so that you avoid any other liability/

I appreciate the chance to help you tonight.Thanks

If you can positive rate5 stars it is much appreciated.

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Check your contract here is standard language

21.

REMEDIES FOR BUYER’S BREACH OF CONTRACT:

A.

Any clause added by the Parties specifying a remedy (such as release or forfeiture of deposit or

making a deposit non-refundable) for failure of Buyer to complete the purchase in violation

of this Agreement shall be deemed invalid unless the clause independently satisfies the statutory

liquidated damages requirements set forth in the Civil Code.

B.

LIQUIDATED DAMAGES: If Buyer fails to complete this purchase because of Buyer’s default, Seller shall

retain, as liquidated damages, the deposit actually paid. If the Property is a dwelling with no more than

four units, one of which Buyer intends to occupy, then the amount retained shall be no more than 3%

of the purchase price. Any excess shall be returned to Buyer. Except as provided in paragraph 14G,

release of funds will require mutual, Signed release instructions from both Buyer and Seller, judicial

decision or arbitration award.

AT THE TIME OF ANY INCREASED DEPOSIT BUYER AND SELLER SHALL

SIGN A SEPARATE LIQUIDATED DAMAGES PROVISION INCORPORATING THE INCREASED DEPOSIT AS

LIQUIDATED

DAMAGES

(C.A.R. FORM RID).

_______/_______

_______/______

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You also likely agreed to mediation then arbitration

22. DISPUTE RESOLUTION:

A.

MEDIATION:

The Parties

agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting

transaction, before resorting to arbitration or court action through the C.A.R. Real Estate Mediation Center for Consumers

(

www.consumermediation.org

) or through any other mediation provider or service mutually agreed to by the Parties. The

Parties

also agree to mediate any disputes or claims with Broker(s), who, in writing, agree to such mediation prior

to, or within a reasonable time after, the dispute or claim is presented to the Broker.

Mediation fees, if any, shall be

divided equally among the Parties involved. If, for any dispute or claim to which this paragraph applies, any

P

arty (i) commences

an action without first attempting to resolve the matter through mediation, or (ii) before commencement of an action, refuses to

mediate after a request has been made, then that

P

arty shall not be entitled to recover attorney fees, even if they would otherwise

be available to that

P

arty in any such action. THIS MEDIATION PROVISION APPLIES WHETHER OR NOT THE ARBITRATION

PROVISION IS INITIALED.

Exclusions from this mediation agreement are specified in paragraph 22C.

B.

ARBITRATION OF DISPUTES:

The Parties agree that any dispute or claim in Law or equity arising between them out of this Agreement

or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding

arbitration. The Parties also agree to arbitrate any disputes or claims with Broker(s), who, in writing,

agree to such arbitration prior to, or within a reasonable time after, the dispute or claim is presented to the

Broker. The arbitrator shall be a retired judge or justice, or an attorney with at least 5 years of residential

real estate Law experience, unless the parties mutually agree to a different arbitrator. The Parties shall

have the right to discovery in accordance with Code of Civil Procedure §1283.05. In all other respects, the

arbitration shall be conducted in accordance with Title 9 of Part 3 of the Code of Civil Procedure. Judgment

upon the award of the arbitrator(s) may be entered into any court having jurisdiction. Enforcement of this

agreement to arbitrate shall be governed by the Federal Arbitration Act. Exclusions from this arbitration

agreement are specified in paragraph 22

C.

“NOTICE: BY INITIALING IN THE SPACE BELOW

YOU ARE AGREEING TO HAVE ANY DISPUTE

ARISING OUT OF THE MATTERS INCLUDED IN THE ‘ARBITRATION OF DISPUTES’ PROVISION DECIDED

BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY

RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY

INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND

APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE ‘ARBITRATION OF DISPUTES’

PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU

MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL

PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.”

“WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING

OUT OF THE MATTERS INCLUDED IN THE ‘ARBITRATION OF DISPUTES’ PROVISION TO NEUTRAL

ARBITRATION.”

_______/_______

_______/_______

Ray
Ray, Lawyer
Category: Real Estate Law
Satisfied Customers: 46,447
Experience: Texas Attorney for 30 years dealing in real estate
Verified
Ray and 87 other Real Estate Law Specialists are ready to help you
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Satisfied Customers: 46,447
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