Just imagine you are selling your house. Your agent has done a terrific job and found a buyer (Buyer A) but the buyer's offer is subject to finance. Buyer A pays the deposit but unfortunately, doesn't get finance approval and cannot undertake settlement. You (or your agent) don't terminate the offer and acceptance.
One week later, the agent has found another buyer (Buyer B) for your house – sounds great? You would think so, but if you enter into an offer and acceptance with Buyer B without first terminating the contract with Buyer A, you will be in breach of the offer and acceptance and Buyer A may sue you for damages.
In another type of scenario, where Buyer A is not able or willing to proceed to settlement (that is, despite getting finance approval), Buyer A is in default. Does this mean you get to keep the deposit? Unfortunately, no. This is because the your conduct in entering into an offer and acceptance with Buyer B can be viewed as being contrary to the existence of the offer and acceptance with Buyer A. Lawyers call this repudiation, or repudiatory conduct.
The lesson to learn is this: a seller and in turn, a seller's real estate agent, must, before readvertising a property for re-sale or entering into negotiations with another potential buyer ensure the first offer and acceptance has been validly terminated.
If finance has not been approved by the finance deadline, the seller can terminate the offer and acceptance by notice. Where the buyer is in default, termination can generally only occur after a default notice has been issued and the required period to comply with the default (usually 10 Business Days) has expired, and a termination notice has been served on the defaulting party.
Real estate agents should also exercise additional caution when removing the "under offer" tag on a website advertisement before terminating the offer and acceptance. Although such conduct, on its own, may not be repudiatory, it does show that desperate buyers will attempt questionable arguments to attempt to get out of an offer and acceptance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
