Ontario, CA asked in Real Estate Law for California

Q: Seller wants to back out - Who is right?

We signed a contract to purchase ($700k) home and entered into escrow. The home inspection showed a lot of repairs, so we decided to cancel the contract. My realtor sent “Cancellation of Contract” to the seller.

The seller called us back saying that they are willing to fix the repairs if we are interested in moving forward. We decided to move forward and ordered an appraisal. The appraisal came at $660 and now the seller is not happy. Our contract stated that if the appraisal comes lower than the contract price, we will pay an additional $10k over the appraised value. In this case, it is $660+$10=$670. Now seller is trying to use the cancellation notice sent by us earlier against us.

Seller’s agent’s response after appraisal: “As you're aware the Buyer cancelled this escrow on 12/23/2021. If your Buyer would like to resurrect this transaction the Seller is willing to, under the at $700.”

Who is right? Can seller use that against us

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2 Lawyer Answers
Yelena Gurevich
Yelena Gurevich
Answered
  • Studio City, CA
  • Licensed in California

A: Each side's lawyer (i.e. buyer's lawyer and seller's lawyer) is going to claim that their respective client is "right." Who will win a lawsuit depends on more facts. Did the seller agree to repairs in writing, thereby waiving the buyer's cancellation? Was the cancellation withdrawn in writing? What was the intention of the parties? How much is each side willing to spend to resolve the issues? Are there attorney fee clauses that make it worth for each side to pursue? Are you subject to mediation/ arbitration, before pursuing a lawsuit?

Essentially you need to consult with a real estate attorney who can review the documents, text messages, emails, etc. and get more information to determine what your options are.

Jarrett Nila Buchanan
Jarrett Nila Buchanan
Answered
  • Long Beach, CA
  • Licensed in California

A: Your Realtor did not do you any favors here. Your Realtor should have spoken with the listing agent and determined whether the seller was willing to do repairs before sending the executed cancellation. In addition, once it was clear that seller was willing to do repairs, your Realtor should have immediately rescinded the cancellation in writing. Because neither of these steps were taken, it appears that the seller has the right to cancel the transaction. That being said, the seller is not likely to get a purchase price $10k over the appraised value from anybody, so this may be a bluff. You may request another appraisal if you believe the first one was low. You may also request that the parties arbitrate or mediate the dispute, per the RPA. Finally, you may want to just cut your losses and look for another property and better representation.

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