What Happens when the Buyer Walks from the Deal?

Many times we think the seller will just take the earnest money and we can walk away. It may not be that simple. The most important rule for a REALTOR® is to remember you are not an attorney and the evaluation of what a buyer walking from the deal means is one that an attorney for buyer and attorney for seller should consider. If you think you can take any facts patterns I use and advise the party using those facts then you have also decided you are an attorney.

Most attorney reviews of buyer default situations will begin with looking at the contract to consider what performances were owed by the seller to the buyer and owed by buyer to seller. First then there is an evaluation of whether the party met or did not meet those performances. Sometimes that is not as simple as it might seem to the REALTOR ®. For example you find out the appraisal was not timely performed so that must be a default by the buyer. Until you find out the appraiser tried to do the work but was driven from the property by an armed seller who had changed their mind about selling (true story).

After looking at the contract then an attorney will try to determine what facts exist to prove or disprove default. This will not be a perfect evaluation because the attorney will be working only from facts known to the party the attorney represents and the REALTOR ® working with that party. Sometimes emails, notes and contractual amendments help establish the likely facts. As an attorney I always keep in mind that I can never know the facts for certain because I can only know those facts as perceived through the eyes and minds of the person I am talking to. There are some other facts that will be revealed by the other side as the matter progresses.

That is why most attorneys do not take their client’s word for anything. We start off with the premise our client is telling the truth as they know it but there is another truth known by the party on the other side. We will learn that truth as the matter progresses and sometimes the truth perceived by the other side is more logical than the truth perceived by our client. In the early days of TV there was a show known by the name of the lawyer – Perry Mason. In each episode Perry had to solve some kind of “who done it” and it was not his client. In one half hour segment we would have to learn why it looked like Perry’ client did the wrong and then on the witness stand Mr. Mason would get the guilty party to confess. I call those “Perry Mason moments”. My almost 40 years says that most liars become so convinced of the correctness of their own falsehood that no amount of “Perry Mason” cross examination will cause them to change their minds. Think about all the times in your life when you knew the truth but someone else argues in the face of facts that the truth you know is false.

This is part of why you should avoid offering legal advice. As an attorney I realize my client may or may not have the facts straight in the same way a judge or jury may find them from all the evidence and I also know that any one man’s opinion – mine – is subject to all my frailty of intellect, observation and understanding such that the man or woman in a black robe may come to a different decision than mine. That is why most lawyers start, or end, their responses with – well of course it depends on this or that.

Default issues are critical to our industry. If buyers will just walk from a deal with no repercussion then of what use is the written agreement. I am often asked that question. The answer is – well they can’t just walk away – only the other side can allow that. The question then becomes when is it efficient for a seller to allow the buyer to walk compared to when should the seller stand up and enforce the contract. That is where the rubber meets the road in lawyer advice. That is where the lawyer says let me look at the contract and understand the facts so I can evaluate the risks and rewards for seller taking action against a defaulting buyer.

Vernon L. Jarboe is an attorney licensed to practice in state and federal courts in Kansas. Mr. Jarboe concentrates his practice in the areas of real estate and business law. He is one of eight well-known real estate educators recently chosen by the Kansas Association of Realtors® to teach video-based online courses that will be available nationally to more than 200,000 real estate professionals. If you have questions about real estate transactions in Kansas, call Vern at 785-357-6311.

The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. The law changes frequently and varies from jurisdiction to jurisdiction. Being general in nature, the information and materials provided may not apply to any specific factual and/or legal set of circumstances. No attorney-client relationship is formed nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction. If you require legal advice, please consult with a competent attorney licensed to practice in your jurisdiction.

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