Q: This is in reference to one of your recent columns about when someone can back out of a contract.
About 25 years ago, I was offered a contract on my house with a rather quick 30-day settlement date. My wife and I had already planned a one-week vacation, so we knew that we would be extremely busy upon our return to be ready to settle in the 30-day time frame.
When we returned after our vacation, we immediately received a phone call from the buyer’s agent that the husband of the couple buying my house had passed suddenly from a heart attack. When she asked me if we would consider refunding the $10,000 deposit, we were quite surprised. Who wouldn’t return the money? We were almost insulted that she felt the need to ask. We not only returned the money but sent the wife a sympathy card.
I hope that the people that are pressing the couple in your column to sell their house after such sad circumstances can sleep well at night. We would have lived with the guilt of keeping that “blood” money if we had not returned it to the grieving wife.
Unfortunately, I continue to be amazed at the cold-hearted callousness of some people that share this planet with us. Karma catches up to everyone eventually.
Thanks for your column.
A: Sometimes it feels like kindness and compassion are in short supply. Especially as we begin our third year of the pandemic. So, we were delighted to receive your letter. We’re sure the widow deeply appreciated your kindness.
The same thing happened to a client of Sam’s about 10 years ago. The husband and wife had just retired and moved to Chicago to be nearer their children. They put an offer on the house and shortly before closing, he suddenly died. Like you, the sellers immediately canceled the deal and returned the good faith deposit.
But sometimes, canceling a sale causes an unintended domino effect.
What if you were selling your home while trying to purchase another at the same time? Let’s assume your funds from the sale were needed for the purchase of your next home. You might not be able to complete the purchase. And what if that seller needed the funds from their sale to buy their next home?
When one buyer fails to complete their purchase, it can start a chain reaction of failures. We can’t foresee all the difficulties that the sellers and buyers up and down the line would face if one buyer failed to close on the purchase of the home they contractually agreed to purchase, but clearly everyone would be scrambling to find alternative means or resources.
Your buyer was lucky. She had you on the other side of the transaction and you were willing to let her go and deal with her loss. Not everyone has the ability to do that, and buyers and sellers up and down that chain of buys and sells would have spent money on their buys, sells, moves and other plans. Some might be out thousands of dollars.
When you sign a purchase agreement, you are contractually obligated to purchase the home and the seller is contractually obligated to sell you the home. If the buyer doesn’t close on the purchase, the seller has certain remedies under the contract, like keeping the good faith deposit or suing for damages. Likewise, if the seller fails to sell, the buyers have their remedies under the contract and can sue to force the sale.
Sometimes a purchase and sale agreement includes a provision that allows either party to exit the deal should one of the parties die, become incapacitated, lose a job, or relocate to a different city for a new job. These provisions are quite rare in residential real estate agreements, but Sam has run across them once in a while. They are less common in seller markets, where too many buyers are competing for too few homes.
We appreciate the position your buyer was in all those years ago and are sure she’s grateful you were able to let her out of the contract without a financial penalty. Her grief was undoubtedly enough.
(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through their website, bestmoneymoves.com.)