FAQ – “How do I provide a release to the seller if my buyer is not going to remove subjects from a Contract of Purchase and Sale?”
In this video Steve Jamieson, Managing Broker of RE/MAX Crest Realty Westside, explains how to provide an early “release” to a seller when the buyer will not be removing conditions.
Here’s a brief summary:
Let’s use a scenario to put the question in context:
Today is Wednesday.
All of the conditions in the Contract of Purchase and Sale are for the benefit of the buyer and are due to be removed on Friday.
There is a “Subject to Inspection” clause and the inspection today revealed issues that would require costly repairs. It is clear that the buyer is not going to progress with the purchase.
You relay the unfortunate news to the listing agent, and they request a “release” for the seller because their deal has “collapsed”.
So which form?
Now, words like “Release” and “Collapse” can cause some confusion because there are some standard forms containing this language in their titles. Let’s straighten that out.
Collapsed Sale Form
You may have come across the “Collapsed Sale Form” on WebForms.
This form only is used if a transaction has been reported as “Sold” to the Real Estate Board (i.e. it’s a “firm” deal), then the deal doesn’t close as anticipated on Completion Day.
While that situation is serious, it rarely occurs. If it does happen to one of your transactions, ensure that your Managing Broker is kept informed so that the correct procedures can be followed.
It used to be common industry practice to collect a deposit upon acceptance of an offer, and increase the deposit upon subject removal.
More often these days, a deposit is not collected until subjects are removed.
The Release form would only be appropriate if there were deposit funds to consider.
All parties to the Contract of Purchase and Sale would need to agree to the release and sign the form to begin the process of releasing the funds from the brokerage trust account.
Provided no deposit has been collected, you may simply draw up an addendum and include a clause such as:
“The Buyer will not be removing subjects on this property and hereby releases the Seller from any further obligations under the Contract of Purchase and Sale dated [date].”
Have your buyer sign the addendum, and simply send that off to the listing agent.
Please note: The Frequently Asked Question video series is used for training purposes within our group of RE/MAX offices. If you are licensed at a different brokerage, you must refer to your own Managing Broker for advice.