What Happens When the Property Seller Backs Out of a Deal?
Helping your clients find the right property in the market can be challenging. Even after finding a potential property, the negotiation process can be taxing, and the outcome may not always be favourable. Sometimes, despite multiple discussions with the seller, the transaction might fall through.
In such cases, it’s crucial to understand the buyer’s rights. Knowing whether the seller is permitted to back out at a certain stage or if your buyer is entitled to compensation after crossing specific milestones in the process is essential.
When Can a Property Seller Retract a Deal?
It’s worth noting that neither the buyer nor the property seller has any obligations until the seller has offered a contract and the buyer has accepted it. During the initial stages, when the buyer is still browsing property listings and scheduling appointments, and no Option to Purchase (OTP) has been exercised, the seller retains the right to decide whether to continue with the sale.
Therefore, even if the buyer has viewed the property and expressed verbal interest, the seller can withdraw from the process at any time without any repercussions.
When Can the Property Seller No Longer Back Out from the Deal?
In Singapore, an Option to Purchase is the most prevalent method for buyers and sellers to formalise a property sale agreement. It establishes a contractual framework between both parties, facilitating the transaction process effectively. This means that if the buyer chooses to exercise the OTP, the buyer and the seller enter into a binding agreement to proceed with the real estate transaction. Whether the seller can back out of the deal depends on the terms outlined in the OTP, so it is crucial to read it carefully before proceeding.
Most OTPs do not allow the property seller to withdraw from the transaction once the OTP has been exercised without consequences.
In contrast, the buyer typically has the option to back out, although this usually results in forfeiture of any option fee or deposit paid. In some cases, after exercising the OTP, the buyer will sign a sales agreement, which is also binding on both parties and generally does not allow either party to withdraw.
What to Do If the Seller Backs Out?
If a seller attempts to back out after the OTP has been exercised or the sales agreement has been signed, the buyer has several options:
1. Negotiate a Settlement
In some instances, the seller may have a legitimate reason for wanting to withdraw from the deal. As a real estate salesperson, your negotiation skills are crucial in such scenarios. You can work towards reaching a settlement that compensates the buyer for any expenses incurred. This could include costs related to inspections, legal fees, or even temporary housing. A successful negotiation not only helps avoid the stress and expense of legal proceedings but also shows your client management abilities and capabilities to resolve conflicts effectively.
2. File a Lawsuit
If negotiation and mediation fail to yield a satisfactory outcome, the buyer can file a lawsuit to enforce the agreement. This legal action could compel the seller to either complete the sale or provide financial compensation for any damages incurred by the buyer. Filing a lawsuit against the property seller is a significant step that will require a thorough understanding of real estate laws and regulations.
Furthermore, it’s important to have a clear presentation of how the seller’s actions have caused financial harm. While this route can be costly and time-consuming, it could be necessary to protect the buyer’s interests and uphold the integrity of the transaction.
3. Claim for Damages
If the buyer experiences financial losses due to the seller backing out, they have the right to claim for damages. This claim can cover a variety of costs, such as those related to securing alternative housing, legal fees, and any other expenses caused by the failed transaction. Calculating and documenting these damages is essential for a successful claim.
Learn More About Buying and Selling Properties at Real Centre Network
Handling property disputes like these requires real estate salespersons to exercise their negotiation skills and demonstrate effective client management. If you want to refine your abilities in these areas, consider enrolling in one of our Continuous Professional Development (CPD) Generic Courses, such as our Property Negotiator course. At Real Centre Network, we offer comprehensive training that equips you with the skills needed to navigate complex situations, enhance your professional expertise, and deliver exceptional service to your clients.
By expanding your knowledge and honing your negotiation techniques, you can better manage challenges in real estate transactions and ensure successful outcomes for all parties involved. Investing in continuous professional development can help boost your career prospects and ensure that you are well-prepared to handle any obstacles that come your way in the dynamic property market.