Real Estate

Can an accepted offer be rescinded?

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  • Sep 21st, 2020 11:34 am
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Jun 3, 2019
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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.
"It is in times of great fear or greed that the most opportunity exists."
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Feb 25, 2007
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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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Jul 15, 2020
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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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Dec 20, 2018
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trebmember wrote: 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.
Any court case will require reasonableness regardless of specific language. The buyer is paying for it and it's a condition to benefit the buyer, you won't convince a judge that satisfactory applies to anyone other than the buyer

That's the reality, yes it could/should have been worded more clearly that's it's to buyer's satisfion, but any reasonableness interpretation which is what will be relied upon will benefit the buyer

I mean if seller doesn't like it, even if the clause did say at the buyers sole and absolute discretion, seller can still Sue and goto court and result will still be reasonableness regardless of actual language
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Jul 15, 2020
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rob444 wrote: 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.
I see, apologies for the misinformation. I was under the assumption that inspection did not have to be a professional home inspection. I thought it would mean an inspection by the buyer, whether it’s professionally done or not.

How about financing conditions,, to pull back, does it have to be a letter from a financial institution? Or can it be a personal problem during the conditional period such as personal emergency and having to spend the downpayment soemewhere else.
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Oct 7, 2007
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We have some real experience in this area.

We put an offer in on a house we decided to buy after looking at houses for a year and getting fatigued from the process. We put in a clause that said subject to building inspection. While we were waiting for the building inspection we were starting to doubt our decision because the house wasn't really the house we wanted so we actually went through with paying for the building inspection ($400 in those days) and then decided not to go ahead. The house did have building inspection issues but I think most people use those issues to get the price down. We just decided that it was money well spent, highly educational and we turned down the house. It also didn't help that the selling agent told us that we were paying more than the house was worth. I couldn't really live with that echoing through my head for the rest of my life.
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BearBullBear wrote: I see, apologies for the misinformation. I was under the assumption that inspection did not have to be a professional home inspection. I thought it would mean an inspection by the buyer, whether it’s professionally done or not.

How about financing conditions,, to pull back, does it have to be a letter from a financial institution? Or can it be a personal problem during the conditional period such as personal emergency and having to spend the downpayment soemewhere else.
Well if you no longer had the downpayment available and told the lender that, then they would probably deny the mortgage anyways. You don't need to show a denial letter to the seller to invoke the financing clause, but in case they took you to court you would need to show evidence to the court that you were genuinely unable to get financing. Not having the downpayment is a genuine reason so as long as it happened during the conditional period you are probably fine. In vast majority of cases when buyers invoke financing or inspection clause to cancel the deal the sellers simply move on and re-list the property, it's very rare they will demand more evidence and take to court.

Similar test of reasonableness and good faith is applied to financing. So if someone is able to get financing, they can't invoke the financing clause due to some unreasonable rate expectation (i.e. the buyers claimed they wanted a 0.5% mortgage rate, or that they asked their buddy Bob to give them a mortgage and they wouldn't), no matter how the clause was worded in agreement.

Good article from a lawyer on backing out a deal due to financing, here: http://www.garfinkle.com/News/News/Fina ... e-cla.aspx
[OP]
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Jan 17, 2016
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trebmember wrote: 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.
The word "satisfactory" here refers to the buyer. It is subjective, so the buyer seems to have a way out if something is "not satisfactory" to the buyer.
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Jul 15, 2020
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choclover wrote: We have some real experience in this area.

We put an offer in on a house we decided to buy after looking at houses for a year and getting fatigued from the process. We put in a clause that said subject to building inspection. While we were waiting for the building inspection we were starting to doubt our decision because the house wasn't really the house we wanted so we actually went through with paying for the building inspection ($400 in those days) and then decided not to go ahead. The house did have building inspection issues but I think most people use those issues to get the price down. We just decided that it was money well spent, highly educational and we turned down the house. It also didn't help that the selling agent told us that we were paying more than the house was worth. I couldn't really live with that echoing through my head for the rest of my life.
what kind of selling agent says stuff like that,,, also i don't recall meeting the selling agent when buying places. But yea i did similar stuff to you before, i got tired of losing on bidding wars, so i made offers without even going to the house because they were like all an hour away. in the beginning i went to every house then gave up. I just put inspection condition and ended up being accepted one of the property and closed it. But i always look at the photos, matterport vigorously before making offers and my agent always went to look at the place for me since they were local! driving 2 hrs every time and losing to emotional buyers paying 100k over asking is always tiring..
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automorphism wrote: The word "satisfactory" here refers to the buyer. It is subjective, so the buyer seems to have a way out if something is "not satisfactory" to the buyer.
Let me clarify, it appears the buyer does have a clause to back out of the deal, it's just not the best worded clause if the seller decided to take it to court. In my previous post of the case Marshall v Bernard Place Corporation we already have a precedent where a judge ruled in the buyer's favour because of 'sole and absolute discretion'. Real estate lawyers were watching this case closely because some of them actually thought the seller had a case. Why chance it when OREA has advised agents to use clauses that has been drafted after this particular case.

In response to StatsGuy - language in a contract is absolutely imperative. Look at the case as reported by the American Bar Association where an appeals court decision was decided because of a missing comma in state law that cost a company $5 million.

https://www.abajournal.com/news/article ... ford_comma
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Never ever accept an offer with conditions. I would sign back with no conditions. It’s a sellers market with multiple offers right now. No need to bend
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Good luck backing out after inspection because of a $1 paint blemish. That would be negotiating in bad faith.
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Furcorn wrote: Good luck backing out after inspection because of a $1 paint blemish. That would be negotiating in bad faith.
You have a point but if the buyer decides to back out, going to court is the only real possibility to get it resolved and fighting a court case costs $$$. In the end, fighting for the principle of things is not really worth it. Also, it's more likely a seller's market right now anyways so OP could relist and sell for more.
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