Can a P&S agreement be cancelled?
Q:
Shortly after we signed a purchase-and-sales agreement to sell our home, my husband had a heart attack. He is fine, but we are having second thoughts about selling.
We were planning on buying a larger home, but now we want to rethink our decision. The whole episode shook us up pretty bad, and we need some time to think and recover.
We do not need the added stress of moving added to our already high anxiety level.
Considering our changed circumstances, are we going to be able to break the agreement?
A:
You can always break an agreement. The question is how much is it going to cost to break the agreement? The answer to that question will depend on the terms of the agreement that you signed.
At a very minimum, you will probably have to return the deposit you took from the would-be buyers and any interest the money has earned.
Beyond that, even if the agreement doesn’t specify any penalties, the buyer could and might reasonably demand that you reimburse him/her for any out-of-pocket expenses they have incurred.
The size of that liability will depend on how far along they are in the process. If they have already agreed to sell their home, they may be forced to find (and pay for) an interim living arrangement until they can find another home to purchase.
In addition, the delay may force them to accept a higher interest rate (or pay more for a comparable home), potentially adding thousands of dollars to their home-buying costs over the life of their loan.
Even if the out-of-pocket loss for the buyers is relatively small, they could drag you into court and tie you up in litigation to force what is known as “specific performance” not just to recover their actual damages but also to require you to honor the agreement and proceed with the sale of your home.
It is possible that your buyers will be very understanding of your situation and bow out of the agreement gracefully. It is also possible that they won’t be understanding at all.
Your decision to renege on your agreement is a serious one with perhaps major ramifications. It should not be taken lightly, but it also needs to be made quickly.
If you feel that your circumstances leave you with no choice except to cancel the transaction, you should, as a first step, consult an attorney specializing in real estate law for help in negotiating whatever arrangement you are going to need to make with the buyers who, to say the least, are not likely to be pleased with your decision.
