Contracts are generally legally binding, and cannot be taken lightly – however, they can be terminated under certain conditions. In real estate, there are two basic types of contracts – the contract you sign with your agent or broker, and the contract you sign to buy or sell a property. In certain circumstances, owing to one reason or the other, you might wish to back out of a contract – depending on the type of contract, and your reason for wanting to terminate it, this process could be easy, or difficult. In either case, however, it is essential to clearly communicate your reasons and intentions to the other party, so the matter is out in the open.
Cancelling a contract with an agent or broker
Start by making your intentions clear to the agent – let him/her know that you want to break the contract. Make your reasons known – are you unhappy with the service the broker is providing, or terminating the contract because you have decided you won’t be selling your home after all? Inquire whether your agent is willing to terminate the contract too – if both parties reach a mutual agreement, the contract can easily be annulled, and any penalties can be avoided.
You can also go through the contract carefully, and read though the sections and clauses that discuss the possibility of the termination of the contract. If you are unhappy with the agent’s services, the contract might allow you to request the agency to assign a new broker to your case. During your thorough study of the contract, you should also look to see if the agent has violated any terms of agreement and not performed as promised – in this case, you will be allowed to legally terminated the contract.
If the agent agrees to cancel the contract, ask for confirmation in writing; however, if the agent refuses, you may seek help in court, and request the judge to help you break the contract. If, however, there is no way out of the contract, you might consider waiting it out, and then foregoing the option for renewing it when the time period finishes.
Cancelling a contract to buy a property
You need to start by letting your agent know that you want to cancel the contract. Review the contract to see if your reasons are valid – the contract will generally outline the reasons for cancelling that are acceptable (e.g. inability to obtain a mortgage, a less than satisfactory home inspection report).
Look into the laws in your province – some laws allow people to cancel contracts within 3 days of signing, if they end up changing their mind. Once you have consulted your broker, and identified your reasons, provide notice to the seller – let him/her know specifically why you are cancelling. Keep in mind, however, that you will most probably end up losing the deposit you paid as “earnest money” when you signed the contract. If, in the worst case scenario, the seller refuses to cancel the contract, hire an attorney and follow the relevant legal procedures.