Blog by Andrew Peck

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"Can a buyer decline a deal with a subject clause?"

"Can a buyer decline a deal with a subject clause?"

"I received a call from the buyer’s agent on an accepted contract informing me that his people are "walking" from the deal because they have decided that they need a garage. This was NOT a subject. Is there anything I can do?"

There are a couple of issues here. I have assumed that the contract did have a subject to inspection clause in it. 

First under the law of agency, the buyer’s agent likely should not have disclosed this information without his client’s consent as it puts them in legal jeopardy. If I were the buyer’s agent I would have informed the buyer that this was not a condition of the accepted contract and they would have two options:

  1. Go speak to their lawyer to get some advice on how to proceed if they have changed their mind.
  2. Seek their permission to try to negotiate an end to the contract with the seller.

As we are working for the seller, now that we are in possession of that information, we have a fiduciary duty to disclose everything we know. So the first thing would be to speak to the seller and inform them of the situation. Likely the seller will ask for advice. While this is a legal question of enforcing a contract, there is a practical side to this. If the buyer can find a legitimate reason to not proceed within their other subjects (i.e. lack of financing or not accepting the inspection report) then the seller does not really have much more that they can do. One of the protections that listing Realtors should be ensuring when they receive a contract from an outside buyer’s agent is to make sure you get an initial deposit on the deal. While I know the general practice has moved towards only taking a deposit upon subject removal, the concept of taking an initial deposit has not changed – to ensure that the buyer follows through with their due diligence and if they don’t then to hold them accountable with the seizure of their deposit.

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