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Buying or Selling a Home/backing out of a purchase agreement

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Expert: John Hendricks - 4/2/2008


Question
I verbally agreed to sell my house to someone about 2 months ago. He brought over the $500 earnest money and the purchase agreement. I cashed the earnest money check, but there were some issues on the purchase agreement that we did not agree on so we did not fill anything out or sign it.

I now have a problem and need to back out of the purchase agreement and return his earnest money. Is this possible? I know that I implicitly agreed to the purchase agreement by cashing the check, however, nothing on the agreement is filled out or signed. The only parts written other than the "standard" legal framework is the purchase price and address. The section on clear title states that if Seller is unable to provide a clear title, either party may rescind the agreement by giving written notice. There is a past mortgage on the house that was paid but never cleared properly from the title and so there is not a clean title. Is this enough? Is there a part of a "typical" purchase agreement that I can look to for reason to rescind?

Thank You,
Joseph Hogue

Answer
Dear Joseph;

Thank you for your question…I am sorry to take as long as I have to respond, but I was not available.

I do not know what state you live in currently, and there maybe laws that govern this situation that I am not be aware of. In the State of California, you do not have a deal unless a ratified contract is in hand by both the buyer and seller.  There are many terms and conditions that need to be agreed upon that would normally be in a contract. If you agreed on price only with the address, stated that appears to be a letter of intent only. Your cashing of the check implies that you may have an agreement in theory, but unless you have written terms and conditions agreed upon in a contract, there is no contract. The potential buyer gave you a check; you cashed it and that you could not come to terms on the contract, with the potential buyer,and now return the deposit for the same amount. You may want to write a note referencing the inability to come to an agreement with the terms and conditions of the contract. Being a California Realtor, and not having a document to refer to, I would recommend you contact a real estate attorney for consultation to determine your exact position.

Also, you are correct in delivering the property with clear title once again on the contract that would be used to purchase the property. Being behind in a payment is not a problem in giving clear title unless there is enough equity in the home to pay off the demand provided by the lender including penalties which the title company would provide you. Now, if the home has decreased in value and you owe more including closing costs than the purchase price, you will not be able to sell the home unless you come out of pocket to pay the difference. One thing you want to be careful of is that you disclosed this situation to the potential buyer at the time that you entered your purchase agreement; or you may be liable for damages if you cannot close escrow. But if you don’t have a ratified contract, you should not have a problem. The attorney could cover this with you during your consultation.

Thanks again for your patience, and I hope this information was of value to you…

Warmest Regards;
John Hendricks

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John Hendricks

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As a California Realtor for 23 years practicing in Marin and Sonoma Counties, it is now time to provide counsel through AllExperts.com to those who need advise in real estate. My knowledge and experience includes a wide range of resale residential real estate purchases, new home sales, income related investment properties involved in 1031 exchanges, and land. Let me help you in any of these areas...

Experience

John Hendricks has established himself as one of Marin & Sonoma Counties premier Realtors. A native Californian, John is a well-known and respected Realtor in both Marin & Sonoma Counties who has resided in the Northbay since 1976. John began his real estate career in 1986, and since then has distinguished himself as one or Northern California's top producing Realtors. Before joining Frank Howard Allen Realtors, John was an associate of the Prudential California Realty from 1990-1992 where his outstanding sales achievements earned him one of the company's highest honors, the prestigious "President's Circle Membership", presented to the top 2% of associates for sales and earning excellence. Since his association with the highly regarded Frank Howard Allen Realtors in 1992, John has once again established himself as one of his company's Top 10 Producing Realtors in Marin & Sonoma Counties for the years 1993 through 2007 and now in 2008. Five continuous years of outstanding performance has now allowed John to join 15 other Realtors in the prestigious "Lifetime Hall of Fame" for Frank Howard Allen Realtors. John established a group of professional individuals who specialize in a variety of areas in real estate called, 'Lundmark-Hendricks Fine Homes' This group of professionals are dedicated to the success of representing clients with the greatest amount of care and service when either buying or selling real estate.

Organizations
California Association of Realtors National Association of Realtors

Education/Credentials
Upon Request...

Awards and Honors
Frank Howard Allen Realtors "Hall of Fame Member" Chairman's Circle for 10 consecutive years

Past/Present Clients
Joe Louis & Sharon Sigurdson We want to thank you again for your excellent representation of interests during the recent purchase of our home in Petaluma as well as the sell of our home in Mill Valley. We had the unusual pleasure of working with you during the last year both as sellers and buyers. We felt that our interests were always paramount and that we received a very fair price for the sale of the Mill Valley house as well as our purchase of our new home. This speaks particularly well of you, because of the recent unstable and chaotic real estate market. Will Finke "Quite frankly, we came out of a very difficult situation, which time does not allow elaborating on. This was one of the greatest experiences of our lives as clients. John Hendricks is one of the top businessmen I have ever met." Bruce & Nancy Rosentreter "I chose John Hendricks to sell my house. I picked him because I thought he was professional, aggressive, and that he could get top dollar for my house. He fulfilled my expectations completely." Joy Schuelke "Since we were trying to sell a high end home in a very tough market, and in the middle of a very rainy winter, the prospects seemed quite bleak. I was convinced at the time, and am even more so now, that without John's tenure, patience, and tenacity, we would have not been able to move the property." Lynn McCarthy "I cannot stress strongly enough how impressed I was with the service provided to me by John and his group. Throughout the entire transaction, John was always available, always forthcoming with excellent advice based on his years of experience, and always willing to put in the extra effort to make this a positive experience for me. I feel lucky to have had the experience of working with him." Lea Lieurance-Turk "Thank you John for your outstanding real estate services for the past 5 years I have known you. You have made my dreams come true as far as selling and buying property."
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