≡ Menu

Breaking a Massachusetts Real Estate Contract

41 Flares Twitter 18 Facebook 8 Google+ 2 Pin It Share 4 LinkedIn 7 StumbleUpon 2 Buffer 0 41 Flares ×
Breaking a Massachusetts Real Estate Contract

Massachusetts Real Estate contract

When a Real Estate client expresses a desire to break a Real Estate contract you know the next few days of your life are probably not going to be too pleasant. When people are looking to break a contract it is usually a highly charged emotional event!

In Massachusetts we are a two contract state. When a buyer wishes to purchase a property, more often than not they will fill out what is known as an offer to purchase contract.  This is later followed up with a purchase and sale agreement which has the same terms and conditions as the offer form but spelled out in much greater detail.

The offer to purchase contract includes all the major terms in the deal including the offer amount, consideration which is the amount the buyer is putting in escrow to secure the property, as well as the agreed upon closing date, and any contingencies. The most common contingencies include the buyers ability to obtain financing and the home inspections that they would like to perform. These include home, pest, radon, well, mold, lead paint and possibly others.

The typical amount you almost always see for initial consideration on a Massachusetts offer form is $500-$1000. When the buyer signs the purchase and sale agreement the buyer will typically put a balance of 5% in escrow. Although this is the amount you see most often, a deposit is always open for negotiations. Sometimes a buyer might not quite have the 5% to put down.

Breaking a Real Estate contract as a buyer

Most of the time the person that wants to get out of a Real Estate contract is the buyer. There could be any number of reasons why a buyer would wish to terminate a contract from general home inspection issues, to the discovery of mold or radon, or some other unforeseen problem with a property.

If the buyer has a contingency within the contract for the reason they wish to terminate then there is no issue and the buyer will receive their deposit back in full.  There is always the possibility that a buyer could try to back out of a Real Estate contract after all their contingency dates have lapsed. In this case the seller would be entitled to keep the money that is in escrow. It is possible that the seller could sue the buyer for damages but in my experience most of the Real Estate contracts that I have seem limit the sellers damages to the deposit amount.

Breaking a Real Estate contract as a seller

What about the seller backing out of a contract? This is a question that I often have to educate my seller clients on. There are many folks who do not realize that an offer to purchase Real Estate in Massachusetts is a BINDING contract. This means that a buyer could sue you for performance and force you to sell your home.

Sometimes sellers can get remorse and feel like they no longer want to sell after they have signed a contract with a buyer. There could be any number of reasons for this happening. Maybe the house the seller wanted to purchase is no longer available or some kind of heath issue crops up with one of the parties that makes selling not an easy task. There could be an endless amount of reasons.

Getting out of a Massachusetts Purchase and sale

What do you do if you are selling your home, have a signed contract and feel that you want to break the contract? The 1st thing you would want to do is make your listing agent aware of the situation and have them get in touch with the buyers agent.

As a seller you are probably going to feel like you are on a stormy island of your own as all the other parties in the transaction are not going to be too happy with your decision.

You can more than likely expect the following:

  • Be prepared to release the buyers escrow money to them with any accumulated interest.
  • Most buyers will more than likely want to reimbursed for any out of pocket expenses they realized during the transaction. These expenses could include: inspections, mortgage application fees, mortgage lock in fees, attorney expenses, etc.
  • Additional complications could include the expense of interim housing if they have already sold their home and were expecting to move into yours.
  • A change in interest rates could be another complicating factor if rates have risen during the time they were under contract. Be prepared to buy down their mortgage rate if they ask.

As a seller what you need to remember in this circumstance is that you are breaking a contract. If you really want to remain in your home you need to be as nice as pie to a buyer. The buyer could easily drag you into court to force what is known as “specific performance” where you are not only forced to sell your home but also reimburse the buyer for any of their costs associated with this mess.

Obviously the best case scenario would be a very understanding buyer who lets you excuse yourself from the contract. Not every buyer is going to be so kind. If you find yourself in this kind of situation a competent Real Estate attorney would be a must! A Real Estate attorney would be able to negotiate the best possible settlement with the buyers or their lawyer.

Other Real Estate articles:

_________________________________________________________________

About the author: The above Real Estate information on breaking a Massachusetts Real Estate contract was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 24+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service the following towns in Metrowest MA: Hopkinton, Milford, Southboro, Westboro, Ashland, Holliston, Upton, Mendon, Hopedale, Medway, Franklin, Framingham, Grafton, Northbridge, Shrewsbury, Northboro, Bellingham, Uxbridge, and Douglas.

email

{ 29 comments… add one }

  • Sandra Carmichael May 27, 2010, 6:16 pm

    Bill this is a very well written article about Massachusetts contract law when buying and selling a home. I am sure there are quite a few home sellers that do not realize that once they sign a Real Estate contract it is very hard to break!

  • Bill Gassett May 27, 2010, 8:21 pm

    Sandra you are right about that! Even though the Massachusetts Real Estate contracts say right on them that they are a legally binding document, many sellers assume that if they change their mind there will be no issue.

  • Stephen Lee November 30, 2010, 1:33 am

    Bill, We ran into this situation in fact recently. The sellers signed the purchase contract, and decided not to sell their house before signing the P&S agreement. Can they walk away without any legal responsibility because of not signing the P&S agreement?

  • Bill Gassett November 30, 2010, 12:41 pm

    Stephen – If you have a signed offer and have met the contingencies that were to happen prior to the signing of the P&S then you probably have legal grounds to force the seller into selling the property to you. The offer is a legal and binding agreement in Massachusetts. This is something you will want to consult an attorney with. Good luck!

  • Esther June 22, 2011, 1:50 pm

    Last year or so we put down 5k on a house at the time of closing no one showed up come to find out the bank had not given them sufficient paperwork to close on this forclosure. we, the buyer wanted our $ back the offered only 1/2 back. we refused hired a lawyer who “sold us down the river” and left us hangin’ with multiple excuses for about a year until his sec’y, feelin sorry for us sent us copies of what he’s been doing behind our back including a letter he sent to the other side basically saying he’s sorry he even bothered and that he knew he was dropping the ball. ending it by saying “by the grace of God go I”! How pathetic. Moreover, I’m scared and alone, but I am preparing to bring a civil case against the broker who has the $in escrow and should not have released it to anyone , and the seller,and whoever else I should sue. Any pertinent advice/assistance will be GREATLY appreciated as I realize tooo much time has already slipped by. BTW, do you know what the statute is for MA? Anyway, I cannot just do nothing I must get these folks into court win or lose!

  • Bill Gassett June 23, 2011, 2:09 am

    Ester sorry to hear about your situation. Going forward on hope you have a good attorney representing you! I believe the statute in Mass is 3 years but check with your attorney.

  • Frustrated July 6, 2011, 6:31 pm

    I purchased a house about a year and a half ago. The deal was a “flip”. A company was purchasing the property as a short sale and selling to us while taking a profit. We signed a P&S and gave them a deposit knowing this information. Our P&S said the deal was subject to them taking title first.

    They wanted to do a dry close meaning we had to sign all closing docs in escrow before taking title. We refused to sign anything until they took title and the original bank/seller pulled the deal from the 3rd party company. We ended up purchasing from the original buyer (at a higher price due to the 3rd party company/real estate agent raising hell), but the real estate company refuses to give us our deposit back because the 3rd party company is stating that they have a claim to the money.

    Is there any recourse we can take? I have contacted an attorney, but I know getting it back won’t be cheap.

  • Bill Gassett July 6, 2011, 6:54 pm

    This is a question only a lawyer is qualified to answer. My guess is you will get the money back.

  • Deb August 9, 2011, 8:06 pm

    Hi Bill, what recourse do we have for getting our Offer to Purchase contract money back. We put a $1000 down on a offer to purchase. The seller backed out before we got the P&S. Our money is being held in escrow by the sellers realtor. The realtor agrees as well as the seller’s attorney that we are entitled to the money but tells us he can’t give us the money until the seller signs a release form. The seller refuses to sign the form. Is the realtor under any obligation to return our money? It has been weeks and it is infuriating that they can hold on to our money.

  • Bill Gassett August 9, 2011, 10:32 pm

    Deb I can understand completely why you are frustrated. The seller should be returning the signed release immediately. The Realtor is just doing what they are supposed to do as an escr0w agent by holding on to the money. As an escrow agent you are not allowed to release funds without both parties signatures. Obviously the seller for whatever reason is trying to piss you off. You could always threaten to put a lien against his house in the amount of the deposit.

  • karewn October 28, 2011, 7:24 pm

    Hi Bill,
    I have an offer to purchase which is set to expire on Oct.31, 5:00pm. The buyers just did a radon test and told me that I have to give them an extension because of the time it takes to get the results back. Is this correct? They had plenty of time to do a radon test before the home inspection which was Wed. 10/26/2011

  • Nancy June 1, 2012, 6:22 pm

    I am asking a question on behalf of my sister. She is currently the buyer on a Bank Owned Home. The Bank is now trying to back out of the Contract. They have already signed both contracts and they were already to close. But now the bank is saying they do not want to Sell at that price.

    Can they renogiate the price? And are they allowed to just back out of the contract? I understand that if they do back out they will be given back their earnest money deposits. But how hard will it be to get re-imbursed for all the inspection fees that they incurred since they went FHA?

    PLEASE HELP. I just found out today.

    Thanks.

  • Bill Gassett June 1, 2012, 6:25 pm

    Nancy if the home was in Massachusetts and their was a standard purchase and sale agreement signed the seller does not have the legal right to back out. The buyer could sue for performance and the bank would lose.

  • Nancy June 1, 2012, 7:59 pm

    Thanks so much for the quick response Bill.

    My sister is actually meeting with her Real Estate Agent tonight to find out the details about this. I told her to not give in until she knows the exact reasoning for the Bank trying to Back out. I have also recommended this page for her.

    I will update you more later. :)

  • joe June 10, 2014, 5:23 pm

    Hi we are the sellers and in the purchase and sales that the buyers attorney drafted we had a 60 day contingency to execute a purchase and sales on new property we could not find anything after trying and trying. The market exploded and we could not afford a house that would meet our needs. So after the 60 days we told buyers that we were not going to extend the sale and that we were going to relist at a higher price due to market dictation, if we had more maybe we could find something. They are now saying that we did not act in good faith?? If we looked at over 50 house and could not find anything how is that not acting in good faith? Isn’t that contingency binding since in was in the P&S and written by the buyers attorney? Thanks

  • Bill Gassett June 11, 2014, 1:57 am

    Hi Joe if everything you describe is 100 percent accurate it sounds like you followed the letter of the contract. Did you not have an attorney representing you? This is really something you should follow up with a lawyer on.

  • gaby June 11, 2014, 12:11 pm

    Hello,

    Can a seller back out of a house sale after signing the P&S agreement? If so, what are possible penalties?

    Thank you!

  • Bill Gassett June 11, 2014, 12:13 pm

    Gaby no you can not. A buyer can sue for performance.

  • Polly Thmpson July 15, 2014, 2:32 pm

    Here’s my situation. Selling property. Signed P&S agreement. Buyer put 5,000 in escrow. Contingency time ran out and 2 days before closing buyer asked for an extension for closing. Granted 30 days with the stipulation that the escrow funds are non-refundable. Buyer signed the contract. He then backed out of the deal and wants his 5000. back. Aren’t we as the sellers entitled to it? Thank you, Polly

  • Bill Gassett July 15, 2014, 2:53 pm

    Hi Polly – according to what you have written here you would be entitled to the buyers deposit unless there were other contingencies that were extended as well such as a mortgage commitment.

  • David July 17, 2014, 7:13 am

    Can a buyer or seller back out of a offer to purchase contract if it was signed after the expiration date of the offer? What if the negotiations continued over text and email?

  • Bill Gassett July 17, 2014, 11:11 am

    Dave this is a question you would want to ask a lawyer but in my opinion I don’t think you could back out.

  • vicky September 8, 2014, 5:32 pm

    we just signed an offer and then decided to cancel on the next day. Can the seller force us to sell the house?

  • Bill Gassett September 8, 2014, 5:36 pm

    Vicky I assume you mean can the buyer force you to sell the house? The answer is probably yes. An offer is a legal and binding contract so as long as the buyer meets their obligations you would need to follow through or the buyer could sue you for performance.

  • vicky September 8, 2014, 5:54 pm

    how much am I likely to pay in damages if the buyer could sue me for performance?

  • Bill Gassett September 8, 2014, 5:59 pm

    It wouldn’t be damages – they could sue for performance to make you sell it to them. This probably won’t happen but they could.

  • Lily September 11, 2014, 1:52 am

    A buyer’s realtor who also represents a seller on the sale of his/her property. The realtor doesn’t have any direct listing contract with the seller previously to the showing of the property. However, on the Offer to Purchase, the realtor sneaks in a sentence saying that at the time of closing, the seller will have to pay him/her 3% of commission. After the seller signed to accept the offer from the buyer, does he/she has an option NOT to pay the realtor the 3% commission due to the fact that there is no listing contract between them and/or because the realtor shows conflicts of interest in serving both parties in the same transaction?

  • Bill Gassett September 11, 2014, 11:33 am

    Lily I am kind of confused by your question. How is the agent representing you if there is no listing contract with the agent? Did you sign an agency disclosure form that states the agent is representing you? Regarding the contract my best guess is you would have to pay the stated commission but this is something you would want to ask an attorney to be certain.

  • Lily September 11, 2014, 2:24 pm

    Thanks Bill for your answer. To clarify the situation, the agent is my neighbor and there is no signed agency disclosure form that state he is representing me or I’m listing the house with his company. I just orrally told him that I’m thinking about selling my house and he brought a buyer to show my property. In this case, do I still have to pay him the commision based on the offer that I accepted from the buyer alone?

Leave a Comment

1
css.php