Must seller sign buyer’s notice of termination if no earnest money has been paid?
QUESTION: My seller entered into a contract on the Offer to Purchase and Contract (form 2-T). The contract provided that the EMD was to be delivered within 5 days of the Effective Date. Before the 5 days was up, and before the EMD was delivered, the buyer agent sent me notice signed by the buyer using form 350-T that the buyer was terminating the contract during the Due Diligence Period.
There’s a place on page 2 of form 350-T where the seller signs to release the EMD, and the buyer’s agent is insisting that the seller needs to sign page 2 in order for the contract to be properly terminated. I don’t think the seller needs to sign because there’s no EMD to release.
Who’s right, the buyer agent or me?
ANSWER: We think you are. The buyer had the right under the Contract, during the Due Diligence Period, to terminate the contract for any reason or no reason by written notice to the seller. The buyer chose to exercise this right. The seller doesn’t have to agree to anything in order for the termination to become effective.
The place for the seller to sign on page 2 of form 350-T is there because of the Real Estate Commission’s Rule requiring an escrow agent, if there’s any dispute about the EMD, to get a written release from the parties consenting to the disposition of the EMD or until disbursement of the EMD is ordered by a court. Although there shouldn’t be any dispute about the buyer’s right to a refund of the EMD when the buyer terminates during the Due Diligence Period, many brokers acting as escrow agents prefer for risk management purposes that the parties sign a consent to the disposition of the EMD. However, in your situation, the EMD wasn’t delivered before the buyer exercised the right to terminate; thus, there is no reason to obtain the seller’s agreement to release the EMD to the buyer.
If the buyer desires to get a written release of any claims the seller may have under the Contract, consideration should be given to using the Termination of Contract by Mutual Agreement (form 390-T). That form does require the signature of both parties to terminate a contract. However, it is not necessary for the buyer to use that form to terminate during the Due Diligence Period, and agents are cautioned against using form 390-T in situations where the Due Diligence Period might end before the seller signs the form 390-T.
Release Date: 05/03/2016
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