The way in which breaking a contract or revoking an offer or property is handled will be determined largely by the contract in place for the transaction. Often time sensitivity will make alterations impossible, thus increasing necessity of haste and attention to detail.
Most real estate companies will an opt-out clause in their contract, and in some cases will allow voidance of the contract altogether upon payment of an opt-out fee usually ranging between $300 and $500.
Process
The process of getting out of a real estate contract will depend on the conditions stipulated in the contract and whether the attempt is made from the position of buying or a selling.
If the contract is with a real estate agent, the following factors should be considered:
– Consideration of the cause of cancellation is important. Is it due to a reversal in interest of selling or buying? Is it an issue with the service provided?
– Discuss voiding the contract may be effective with negotiation over a termination fee. A broker may be more hesitant to end a contract with a seller due to time and effort invested in the property, as well as advertising expense. Covering these costs is likely to create leniency.
– In case the contract is properly ended it is important to make it entirely void. There may be clauses holding that a commission may be claimed by the broker if property is sold independently of her involvement in the future.
– An alternate option is waiting until the contract is void. This is a possible approach in case the broker is unwilling to release a buyer or seller from their contract. Most contracts have a limit of 6 months of validity, and most brokerages will allow a cancellation of the listing agreement without question.
– In some cases there may be breaches of contract, which can also be a viable reason for contractual reversion. Claiming a breach should be saved as a last resort as it is escalatory and may go to court.
Canceling a Contract to Buy
Cancellation of purchasing a property is more complicated and requires immediate contact with the real estate broker. It is crucially important not to sign, to go over terms carefully, including time restraints, and avoid negotiation as much as possible. There can be many reasons that someone may choose to cancel a potential sale, which may include an inspection failure, a low appraisal, failure to receive funding, etc.
