In the process of selling a house, it can be really frustrating if the transaction process does not go smoothly. I recently received a private message like this,"We signed a contract soon after my house was put on the market, but then the buyer's side encountered frequent problems and troubles. Can I cancel the contract?"

It seems to be a simple question of yes or no, but in fact it contains quite a lot of tricks. Under what circumstances can the seller cancel the contract? How to deal with the deposit for purchasing a house after canceling the contract? This article gives you the answer.

Let’s talk about the circumstances under which the seller can cancel the contract? At the beginning of the transaction, the RPA signed by the buyer and seller, that is, The California Residential Purchase Agreement and Joint Escrow Instructions, which clearly stipulate that the seller has the right to cancel the contract when the following circumstances occur. These situations include:

Firstly, the buyer fails to remove the contingencies in the contract within the specified time. There are three contingencies in the contract that can fully protect the buyer. That are loan contingency, appraisal contingency and investigation of property contingency.

To put it simply, these three contingencies give the buyer a guarantee to withdraw from the contract. For example, if the buyer cannot get a loan, or the house valuation is lower than the appraisal, or if the buyer does a home inspection and feels that there are too many repairs need to be done and no longer wants it, the buyer can withdraw from the contract within the specified time. However, if the stipulated time is exceeded and the buyer does not remove these contingencies to show that they are determined to buy, the seller has the right to terminate the contract at this time.

Secondly, the buyer did not hand over the initial deposit to the Escrow company, or failed to pay the deposit within the specified time; or the buyer promised to make an additional deposit but failed to pay it.

The deposit for a house purchase shows the buyer's sincerity. The buyer gives the deposit to the Escrow company. When the transaction is about to end, the deposit will be used as part of the buyer's payment and finally handed over to the seller. If you don't know about Escrow Company here, you can read my previous article"What should seller pay when selling a house in San Francisco Bay area? "，where I introduced that Escrow Company is a neutral third party that protects the interests of buyers and sellers.

Thirdly, the buyer did not provide the seller with his pre-approval letter, or did not provide proof of fund in his bank statement, or the seller had reasonable reasons not to approve the bank statement, or the buyer did not sign and submit a series of disclosure documents to the seller, etc.

Regarding disclosure documents, I have introduced in detail how the two disclosure documents, TDS and SPQ, protect buyers and sellers, but disclosure documents are not just these. There are also NHD reports, natural disaster reports, and preliminary title reports. Etc., I will introduce the importance of these disclosure reports to you in detail in subsequent articles. You are welcome to bookmark my website and help you clear up pitfalls on the road to buying and selling a house.

Fourthly, the seller’s contingency in the contract. At the beginning of signing the contract, the seller may also include a contingency, such as finding a new place to live or buying a house before selling the house. Such contingency protect the seller from being able to withdraw from the contract.

In the above situations, the seller can propose to cancel the contract, but it is not limited to these situations. Other examples are like both parties agree to cancel, or the buyer cannot close the transaction on time within the specified time, etc.

The next question that you may be more concerned about is, after canceling the contract, how to deal with the deposit for buying a house?

There is no unified fixed answer here, because the terms negotiated by the buyer and the seller in different contracts are different, so the requirements for the return of the deposit in the contract need to be analyzed on a case-by-case basis.

Here is a reminder that you must communicate and discuss more with your real estate agent. Professional agents will provide you with suggestions based on different situations. The agent association also has lawyers in the real estate industry to support agents in providing better services to customers and helping them provide better services to their clients. Of course, you can also find a lawyer yourself for consultation.