Realtor Blunder?

[Chipan]

What is the name of your state? California

So we have been trying to sell a house to buy another. The house we're trying to buy is a new home build, and we had a couple months before it was finished.

Our house we are selling got offers quick. We entered escrow for the first time, but our buyer informed us she didn't want to move forward on day 17 of escrow, the day after she got a notice to perform for failing to get her inspection done. She didn't want to proceed because a sex offender lived nearby. Our realtor told her agent she wasn't getting her deposit back and threatened potential legal action on her (all without our consent). We did give her deposit back because we got another good offer and wanted to be done, but she did withhold her signature as an attempt to extort us for more money to reimburse her for appraisal and inspection (even though the inspection didn't happen). We ignored it because the broker and title company said her signature wasn't necessary to start a new escrow, and eventually she signed it and took her money because everyone blocked her.

For the next escrow everything seemed fine throughout up until day 30. On day 30 we found out they weren't approved for the loan. The reason was because these buyers were planning on renting the property, but their rental price was above average for the area. Their agent told our agent they could get approved if they put 10k toward it, but they instead gave us a cancelation notice. We asked if they could work with us, they said yes... but then they stood firm on lowering the price by 37k or they walk. This was unacceptable to us, but now we're in a bind. We were supposed to move in this weekend and now we don't even have a buyer.

This got me to ask our realtor how this could happen when we had a loan approval deadline on day 17 in the contract. He said he never enforces that contingency waiver because buyers won't waive it. This just seems wrong to me. Why have it at all if they can just use it up to closing day?

So I want to know if my realtor messed up and potentially violated his legal or feductiary obligations to us. As for our game plan, we're trying to get back into escrow to salvage the situation. But if we lose the house we're buying, we planned on pulling out of the market for now. Whether we can void our contact with him for his conduct will be a decisive factor in that decision.

And for clarification, we do have a sellers contingency with them, so we will get our deposit back if they cancel us. We'll just be out for the appraisal and inspection we paid for if this all falls through.

 

[adjusterjack]

It's not up to your realtor to "enforce" anything. He's not a lawyer. If you want to enforce any of the terms of your contract you hire a lawyer and litigate if you have to.

Real estate is unpredictable in the best of circumstances, worse if you have to sell a house to buy a house. Things can go wrong and often do.

I don't see that your realtor did anything wrong. What happened was beyond his control.

 

[quincy]

What is the name of your state? California

So we have been trying to sell a house to buy another. The house we're trying to buy is a new home build, and we had a couple months before it was finished.

Our house we are selling got offers quick. We entered escrow for the first time, but our buyer informed us she didn't want to move forward on day 17 of escrow, the day after she got a notice to perform for failing to get her inspection done. She didn't want to proceed because a sex offender lived nearby. Our realtor told her agent she wasn't getting her deposit back and threatened potential legal action on her (all without our consent). We did give her deposit back because we got another good offer and wanted to be done, but she did withhold her signature as an attempt to extort us for more money to reimburse her for appraisal and inspection (even though the inspection didn't happen). We ignored it because the broker and title company said her signature wasn't necessary to start a new escrow, and eventually she signed it and took her money because everyone blocked her.

For the next escrow everything seemed fine throughout up until day 30. On day 30 we found out they weren't approved for the loan. The reason was because these buyers were planning on renting the property, but their rental price was above average for the area. Their agent told our agent they could get approved if they put 10k toward it, but they instead gave us a cancelation notice. We asked if they could work with us, they said yes... but then they stood firm on lowering the price by 37k or they walk. This was unacceptable to us, but now we're in a bind. We were supposed to move in this weekend and now we don't even have a buyer.

This got me to ask our realtor how this could happen when we had a loan approval deadline on day 17 in the contract. He said he never enforces that contingency waiver because buyers won't waive it. This just seems wrong to me. Why have it at all if they can just use it up to closing day?

So I want to know if my realtor messed up and potentially violated his legal or feductiary obligations to us. As for our game plan, we're trying to get back into escrow to salvage the situation. But if we lose the house we're buying, we planned on pulling out of the market for now. Whether we can void our contact with him for his conduct will be a decisive factor in that decision.

And for clarification, we do have a sellers contingency with them, so we will get our deposit back if they cancel us. We'll just be out for the appraisal and inspection we paid for if this all falls through.

Whether you can void the contract you signed with your realtor depends on the terms of the contract.

You can always cancel any contract. The question is what penalty will you face for doing so. Typically you will have to pay any dismissed-or-replaced realtor the agreed-upon commission (or a percentage of this commission) for any property you purchase that they were involved in securing for you.

If there are contingencies in a purchase agreement that you accept with your buyers that allow for cancellation of the agreement up to the date of closing, you take a risk that the agreement will be canceled right before closing - just as the sellers of the property you want to purchase took a risk with you canceling at the last minute.

Sometimes a realtor or realtors for both parties will take a reduction in their commission just to get a purchase agreement through closing but this is not something they have to do. And sometimes a realtor will recommend taking legal action against a purchaser who backs out of a contract, but a legal action is often not worth the time, effort or expense of pursuing especially when there is no guarantee a court decision will be in your favor.

It can be recommended that you do not submit an offer to purchase until you have guaranteed funds necessary for purchase. The reasons for having contingencies in purchase agreements is that financing can fall through, inspections can find undisclosed defects in a property, unexpected illnesses or deaths can affect the ability to sell or to buy … and all of these are outside the control of the realtors.

I think your best course of action may be to hold off on any future purchase agreement on a property you wish to purchase until you have a solid agreement signed on your own property that has already navigated successfully all contingencies, then, if necessary, schedule a move-in date for your purchasers for a time after you close on the property you want.

You can consult with a real estate attorney in your area if you want to see what reasonable options are available to you. I personally don’t see a lawsuit against your realtor as reasonable, based on what you have said here.

Good luck.

 

[Chipan]

It's not up to your realtor to "enforce" anything. He's not a lawyer. If you want to enforce any of the terms of your contract you hire a lawyer and litigate if you have to.

Real estate is unpredictable in the best of circumstances, worse if you have to sell a house to buy a house. Things can go wrong and often do.

I don't see that your realtor did anything wrong. What happened was beyond his control.

I appreciate you sharing your perspective, but I have to respectfully disagree with the idea that the realtor did nothing wrong and that this was simply 'unpredictable.'


That line of thinking suggests a realtor's job is just to sit back and watch things happen. If an agent can just choose not to enforce any deadline, then why even bother having a contract with a timeline for the contingencies? The buyer could wait until the last day, walk away scot-free after the deadline passed, and we would have lost months of time for no reason.


The reality is that realtors are licensed professionals—they have a legal duty of care and diligent performance.


When a deadline comes up, the Notice to Perform (NTP) is the specific tool the agent is professionally required to use. It's not practicing law; it's using the standard paperwork to force the buyer to commit or cancel.

The agent's job is to protect our interests and manage the process to minimize risk, especially when things get messy. Failing to use the NTP is a failure to perform that core duty.

 

[Zigner]

When a deadline comes up, the Notice to Perform (NTP) is the specific tool the agent is professionally required to use.TP is a failure to perform that core duty.

"Required" by whom?
When you didn't get the confirmation that the buyer had financing, why didn't you follow up? It's clear you know what a NTP is used for.

 

[Chipan]

Whether you can void the contract you signed with your realtor depends on the terms of the contract.

You can always cancel any contract. The question is what penalty will you face for doing so. Typically you will have to pay any dismissed-or-replaced realtor the agreed-upon commission (or a percentage of this commission) for any property you purchase that they were involved in securing for you.

If there are contingencies in a purchase agreement that you accept with your buyers that allow for cancellation of the agreement up to the date of closing, you take a risk that the agreement will be canceled right before closing - just as the sellers of the property you want to purchase took a risk with you canceling at the last minute.

Sometimes a realtor or realtors for both parties will take a reduction in their commission just to get a purchase agreement through closing but this is not something they have to do. And sometimes a realtor will recommend taking legal action against a purchaser who backs out of a contract, but a legal action is often not worth the time, effort or expense of pursuing especially when there is no guarantee a court decision will be in your favor.

It can be recommended that you do not submit an offer to purchase until you have guaranteed funds necessary for purchase. The reasons for having contingencies in purchase agreements is that financing can fall through, inspections can find undisclosed defects in a property, unexpected illnesses or deaths can affect the ability to sell or to buy … and all of these are outside the control of the realtors.

I think your best course of action may be to hold off on any future purchase agreement on a property you wish to purchase until you have a solid agreement signed on your own property that has already navigated successfully all contingencies, then, if necessary, schedule a move-in date for your purchasers for a time after you close on the property you want.

You can consult with a real estate attorney in your area if you want to see what reasonable options are available to you. I personally don’t see a lawsuit against your realtor as reasonable, based on what you have said here.

Good luck.

I appreciate your advice, but I think the distinction between 'canceling' and 'voiding' the contract is key here.


I am not trying to use a standard cancellation clause and pay a penalty. I am investigating grounds to void the listing contract for cause, based on a material breach of fiduciary duty by the agent.


The primary issue is the agent's failure to exercise his professional duties—specifically, the Duty of Diligent Performance and Care—by neglecting to enforce the contractual deadlines. The loan contingency was set at 17 days.


The agent did not attempt to issue a Notice to Perform (NTP) after day 17, which is the required professional step to protect the seller. Because of this inaction, the buyer was allowed to stay in escrow until day 30 before canceling, tying up the property unnecessarily for nearly two weeks.


My issue is not that the buyer backed out, but that the agent failed to use the necessary contractual tools to mitigate our risk and enforce the agreement's timeline, which constitutes a breach of his professional duty to us, the clients.

 

[Chipan]

"Required" by whom?
When you didn't get the confirmation that the buyer had financing, why didn't you follow up? It's clear you know what a NTP is used for.

I know after the fact. We hired a professional specifically to handle these issues because we are not experts.

 

[quincy]

I know after the fact. We hired a professional specifically to handle these issues because we are not experts.

I guess you should consult with an experienced real estate attorney in your area, then, to explore your options.

Good luck.

 

[adjusterjack]

I guess you should consult with an experienced real estate attorney in your area, then, to explore your options.

Good luck.

Ditto.