Real Estate

Can an accepted offer be rescinded?

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  • Aug 9th, 2021 3:34 pm
[OP]
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Can an accepted offer be rescinded?

A buyer has sent an offer to buy a house, and it was accepted. The offer doesn't have a financing condition, but it has an inspection condition. Is there a possibility that the buyer can rescind his offer even before an inspection will be done? And if the inspection is done and nothing significantly 'bad' is found, can he still rescind the accepted offer? Thanks.
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automorphism wrote: A buyer has sent an offer to buy a house, and it was accepted. The offer doesn't have a financing condition, but it has an inspection condition. Is there a possibility that the buyer can rescind his offer even before an inspection will be done? And if the inspection is done and nothing significantly 'bad' is found, can he still rescind the accepted offer? Thanks.
How was the inspection clause worded? And why do you think the buyer will rescind?
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Its possible. Especially if the condition has a term saying “ Buyer's sole and absolute discretion.”

You could take it to the court but it wouldn’t be worth the money or time.
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Like what others have said, it depends on the wording of the condition. Basically the buyer can back out of the sale if they find anything they don't like from the inspection. It's an out for the buyer. They could even go and try to get financing and realize they can't get it but they can use the inspection clause to back out of it. The other poster also said you could take them to court but it's likely a waste of time. This is what my agent told me when we were selling our place. Good luck.
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[OP]
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trebmember wrote: How was the inspection clause worded? And why do you think the buyer will rescind?
It says to the effect that the following reports are to be obtained to be found satisfactory: a home inspection, a gasline locate, confirmation of municipal taxes and water potability.

Well the buyer has no financing condition, so who knows...
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If they use the inspection clause as their escape without doing the inspection, technically you can take legal action for negotiating in bad faith. If they do the inspection and the clause is worded properly then they can back out of the deal, without giving any reason whatsoever. If they have already submitted the deposit, that is the only leverage you have to threaten legal action. But in both scenarios, it's best to just let them walk away and tell your agent to put it back on the market.
Last edited by trebmember on Sep 18th, 2020 12:01 am, edited 1 time in total.
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automorphism wrote: It says to the effect that the following reports are to be obtained to be found satisfactory: a home inspection, a gasline locate, confirmation of municipal taxes and water potability.

Well the buyer has no financing condition, so who knows...
"found satisfactory" and the home inspection is where I believe the buyers COULD back out of the deal for other reasons not specified. Who knows.
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A properly worded inspection clause should read:

This Offer is conditional upon the inspection of the subject property by a home inspector at the
Buyer’s own expense, and the obtaining of a report satisfactory to the Buyer in the Buyer’s sole
and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller
personally or in accordance with any other provisions for the delivery of notice in this
Agreement of Purchase and Sale or any Schedule thereto not later than 9:00 pm on the 10th
business day after acceptance of this offer (excluding Saturdays, Sundays and Statutory
holidays), that this condition is fulfilled, this Offer shall be null and void and the deposit
shall be returned to the Buyer in full without deduction. The Seller agrees to cooperate in
providing access to the property for the purpose of this inspection. This condition is included
for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to
the Seller as aforesaid within the time period stated herein.

What protects the buyer is 'sole and absolute discretion' and 'This condition is included for the benefit of the Buyer'
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trebmember wrote: A properly worded inspection clause should read:

This Offer is conditional upon the inspection of the subject property by a home inspector at the
Buyer’s own expense, and the obtaining of a report satisfactory to the Buyer in the Buyer’s sole
and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller
personally or in accordance with any other provisions for the delivery of notice in this
Agreement of Purchase and Sale or any Schedule thereto not later than 9:00 pm on the 10th
business day after acceptance of this offer (excluding Saturdays, Sundays and Statutory
holidays), that this condition is fulfilled, this Offer shall be null and void and the deposit
shall be returned to the Buyer in full without deduction. The Seller agrees to cooperate in
providing access to the property for the purpose of this inspection. This condition is included
for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to
the Seller as aforesaid within the time period stated herein.

What protects the buyer is 'sole and absolute discretion' and 'This condition is included for the benefit of the Buyer'
That's not how it's worded, but it does contain the words that the inspection would be done at the buyer's expense.
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automorphism wrote: That's not how it's worded, but it does contain the words that the inspection would be done at the buyer's expense.
Done 'at the buyer's expense' just means that the buyer is paying for the home inspection. If the buyer's agent is inexperienced in that he/she didn't use that clause or something very close to it with - 'sole and absolute discretion' and 'This condition is included for the benefit of the Buyer' then the buyer's agent didn't fully protect their client. There was a lawsuit Marshall v. Bernard Place Corporation where the buyer did the inspection but only found very very minor issues but decided to walk away. Naturally the seller sued...but lost because of those two sentences.

I should add that the four year legal battle cost the seller over 100k because of principle
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trebmember wrote: Done 'at the buyer's expense' just means that the buyer is paying for the home inspection. If the buyer's agent is inexperienced in that he/she didn't use that clause or something very close to it with - 'sole and absolute discretion' and 'This condition is included for the benefit of the Buyer' then the buyer's agent didn't fully protect their client. There was a lawsuit Marshall v. Bernard Place Corporation where the buyer did the inspection but only found very very minor issues but decided to walk away. Naturally the seller sued...but lost because of those two sentences.

I should add that the four year legal battle cost the seller over 100k because of principle
Wow! That's crazy to fork over $100K just to make a point but I guess someone's got money to do that.
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A good agent, would try to counter the clause by adding additional wording that if the amount to correct all deficiencies is less than $1,000, the seller has the right to correct the deficiencies and the buyer is still required to close the deal. But if the buyer truly wants to walk away, for whatever reason, just let it go and find another buyer that wants to close (even if it's for less money).
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trebmember wrote: Done 'at the buyer's expense' just means that the buyer is paying for the home inspection. If the buyer's agent is inexperienced in that he/she didn't use that clause or something very close to it with - 'sole and absolute discretion' and 'This condition is included for the benefit of the Buyer' then the buyer's agent didn't fully protect their client. There was a lawsuit Marshall v. Bernard Place Corporation where the buyer did the inspection but only found very very minor issues but decided to walk away. Naturally the seller sued...but lost because of those two sentences.
The agent happens to be the same agent for both the buyer and the seller.

How much did the buyer lose in that lawsuit?
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automorphism wrote: The agent happens to be the same agent for both the buyer and the seller.

How much did the buyer lose in that lawsuit?
I don't know, my legal summaries only mentioned what the seller paid in legal fees
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automorphism wrote: It says to the effect that the following reports are to be obtained to be found satisfactory: a home inspection, a gasline locate, confirmation of municipal taxes and water potability.

Well the buyer has no financing condition, so who knows...
"to be found satisfactory: a home inspection"

Your buyer pretty much has an out as long as he gets the inspection done, he doesn't have to share the report with you just has to say he didn't find it satisfactory.

No need to overthink this, you'll be better off just letting him walk and relist like others mentioned. It's an "Easy out clause".
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deal_with_singh wrote: "to be found satisfactory: a home inspection"

Your buyer pretty much has an out as long as he gets the inspection done, he doesn't have to share the report with you just has to say he didn't find it satisfactory.

No need to overthink this, you'll be better off just letting him walk and relist like others mentioned. It's an "Easy out clause".
Hi deal_with_singh,

I have to politely disagree with your statement that the buyer pretty much has an easy out as long as he gets the inspection done. The words 'to be found satisfactory' is subjective - satisfactory to whom? and how satisfied does that person(s) have to be? I wouldn't want to take a chance on this wording in a court of law.

There are often used clauses written by OREA for a reason and any agent who chooses not to use them is 1) not protecting their client and 2) nor themselves and just looking for trouble.
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deal_with_singh wrote: "to be found satisfactory: a home inspection"

Your buyer pretty much has an out as long as he gets the inspection done, he doesn't have to share the report with you just has to say he didn't find it satisfactory.

No need to overthink this, you'll be better off just letting him walk and relist like others mentioned. It's an "Easy out clause".
I agree, I always look at that clause as a “Cold Feet” clause. Especially in a market like this with bidding wars. Taking the higher bid but has an inspection clause is a recipe for cold feet as the buyers rethink their offer over the next week. It absolutely is an easy out clause.

For sellers I would usually recommend having a home inspection done ahead of time by a 3rd party. If buyers don’t like it, that’s their problem. In that case if a buyer is still trying to insert an inspection clause, you have to be suspicious.
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deal_with_singh wrote: "to be found satisfactory: a home inspection"

Your buyer pretty much has an out as long as he gets the inspection done, he doesn't have to share the report with you just has to say he didn't find it satisfactory.

No need to overthink this, you'll be better off just letting him walk and relist like others mentioned. It's an "Easy out clause".
trebmember wrote: I have to politely disagree with your statement that the buyer pretty much has an easy out as long as he gets the inspection done. The words 'to be found satisfactory' is subjective - satisfactory to whom? and how satisfied does that person(s) have to be? I wouldn't want to take a chance on this wording in a court of law.

There are often used clauses written by OREA for a reason and any agent who chooses not to use them is 1) not protecting their client and 2) nor themselves and just looking for trouble.
Sounds like you're both right and I don't think your answers are inconsistent.

It would be better practice to use the more unambiguous OREA clauses. That being said, should the buyer not wish to proceed, you generally cannot compel them to. The bar for requiring "specific performance" is very high. You can merely seek to recover damages from them for breach of contract, and that requires you to have taken reasonable steps to avoid and/or mitigate your damages. It's unlikely to be worth it.

So if they back out, you will need to relist and make a reasonable attempt to sell, and not at a fire sale price. Then you *could* go and try to sue them if there was a price difference, as well as for damages you faced from the delay, etc. And both parties could, in the extreme, spend a lot of money on lawyers to argue the "satisfactory to whom" point, as well as whether you did in fact do a reasonable job of mitigating your damages.

Unless there is a unique set of circumstances, wait it out patiently at the start, and prep for an immediate re-listing if there are disquieting signals the buyer is getting cold feet.

BTW, I am not a lawyer or real estate agent. But I have been a seller in a situation like this and received roughly this advice from my lawyer. And I've worked with all sorts of contract breaches in my (real-estate unrelated) work, where similar issues arise in a different form.
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I don't think it has to be a professional inspection. If buyer says they don’t like the outcome of the inspection there isn’t much you can do. It can be a little chip on the door but it’s what it is.

Its also a possibility that the buyer does not have financing yet but to win the bidding war he removed it and put inspection clause. Because sellers typically don’t like financing but are ok with inspection as long as you don’t have foundation problems or such.

All in all i think it’s very possible to get out of the deal as a buyer if he decides to and there is very little you can do about it considering the cost and time to fight against it.

It’s a big pain in the ass when you get a buyer like this but hopefully he won’t pull back. You should talk to your realtor too they know the best.
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BearBullBear wrote: I don't think it has to be a professional inspection. If buyer says they don’t like the outcome of the inspection there isn’t much you can do. It can be a little chip on the door but it’s what it is.
This is not true. There is an underlying legal requirement in any contract, regardless of the wording, to act reasonably and in good faith. This means if you have a home inspection clause, it should legally only be used to cancel deal due to a failed home inspection. Similarly financing clause should legally only be used to cancel a deal if you are unable to get financing.

For home inspection, to prove you acted reasonably (if it went to court) to invoke this clause you would need to have done a home inspection with a qualified inspector. To try and invoke the clause without a home inspection actually being done, or by some random person unqualified to do so, could be seen as unreasonable and done in bad faith. Same thing if you had the inspection done, but you for some reason had correspondence with seller that the reason to invoke the inspection clause was for something different (like financing). This would also be done in bad faith.

Once you get a qualified home inspection done, you are generally then in the clear as the "sole and absolute discretion" part will kick in to give you an out to cancel the deal. But you have to actually go through the proper steps first.

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