Buyers and sellers are human and sometimes they change their minds, even after signing a sale agreement. The law tends to frown on this and adopts the approach of pacta sunt servanda, or “agreements must be kept”.
From the buyer’s perspective, remorse or cold feet can set in, leaving the buyer searching for ways out of the contract. A common tactic, where there’s a bond involved, is for the buyer to approach the bank and attempt to sour the deal by saying something like “I won't be able to afford this anymore”. Naturally, a financial institution would be circumspect about finally approving a bond granted in principal if a buyer expresses doubt about his ability or willingness to meet repayments.
From the seller's perspective a common scenario is to have second thoughts if there is any inkling of a higher offer, imagined or real, particularly if they have already compromised on the asking price.
Of course, reasons for buyers and sellers wanting to pull out of a deal are as diverse as human nature. The real issue is what can the other party do to save the situation and force the deal through?
Act in good faith
Firstly, sellers should ensure that the agreement of sale contains a clause that in effect compels the buyer to take all necessary actions to obtain finance, in good faith and to the best of his ability. This at least gives the seller a contractual basis on which to hold the buyer to his end of the bargain.
Buyers should ensure that the agreement of sale imposes a similar, reciprocal obligation on the seller to do everything necessary, and to do so in good faith, to transfer the property to the buyer.
Of course an agreement, no matter how meticulously drafted and binding, cannot cover every eventuality. Although litigation is a stick that can be wielded to enforce a contract, reasoned and compassionate communication as a first approach can often save the sale and prevent the need to approach a court. Understanding the reasons for either party wanting to withdraw will often permit the other party to allay any unreasonable fears rather than exacerbate them with the threat of legal action.
Agent’s commission
Remember that even if both the buyer and the seller agree to cancel a sale, there is always the issue of agent's commission. Regardless of the circumstances, an agent has performed his job, namely to find a buyer for the property concerned. From an agent’s perspective, once both parties have signed an agreement of sale, their job has been done and commission is due, usually by the seller. The bottom line is that sellers should consult all parties involved in the agreement and find out what the financial implications will be in the event of accepting the cancellation of a sale.
The appropriate time for having doubts is before signing a contract, not afterwards. As always, consult an attorney if in doubt.
