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When the seller backs out of the property sale?

When the seller backs out of the property sale?It’s time to tell you what can happen when a seller backs out of the property sale. In another blog, I’ve covered what happens when the buyer backs out of a property sale in Costa Rica.

Today, we’ll turn things around.

A real estate deal can be scary as hell, for both sides. Some people turn into a nervous wreck during the process. The nervousness depends a lot on how good the real estate agent is, putting the deal together. But, a huge influence on the deal going sour is the lawyer who puts the option to purchase – sale document together.

Fortunately, there are not many reasons that a seller backs out of the sale. Usually, it’s the seller who creates the most controversy and problems during the process. But it’s the agent’s responsibility to deal with that. Until we finally get to the closing…

In another blog, I’ve already explained the differences between a Tico deal and a Gringo deal.  So I’d rather prefer you go back to that blog first, for an update, before you read on.

Purchase – sale option

Once the lawyer writes up the purchase – sale option and it is signed by all parties, there is really nothing much to do until closing. It’s just a matter of giving the buyer time to get the money in place for the closing. And, it buys the seller time to get all the documents in place for closing.

When the seller backs out of the property sale?

Seller backs out

So what options does the seller for backing out, if the option agreement is written up well? Really not many:

1.       There is a legal problem with the property. For example, a difference between the registered size of the property and the size on the survey map.

2.       The seller passes away before closing.

What to do

Legal Problem

The solution to option one can be easy if both parties agree to give it time to fix. BUT, there are legal problems that don’t have a solution. A good realtor should have caught that (as well as the lawyer) when they wrote up the option to purchase – sale agreement.

A Dead Seller

This is why it is so important that the earnest money stays in escrow until closing. With a dead seller, if there is no one else with a full power of attorney to close, the earnest money can just be returned to the buyer.

I have seen families use earnest money to bury the dead seller. If there is no will and the seller’s assets have to go into probate, there is a huge problem. That’s because the probate process can take a while.

When the seller backs out of the property sale?

A Bad Deal

It depends on how the lawyer writes up the option purchase-sale agreement. Usually, if a buyer walks away before closing, without having any legal reason, the buyer loses the earnest money deposit.

Often, agreements state that if the seller doesn’t sell, the earnest money deposit has to be returned to the buyer. Which is very little protection for a buyer, in case the seller has received a better offer from another buyer for example.

Most sellers are not willing to sign an agreement where they are obliged to pay the buyer the same earnest money amount (after returning the deposit) as a penalty. I have tried, believe me.

Fortunately, in my 30-year career as a real estate broker, I have not yet seen a seller walk away from the closing because there was a better offer (knock on wood).

My recommendation

1. Before signing an option to purchase – sale agreement, check if the property and the seller don’t have any legal problems

2. If the earnest money is not deposited in escrow, demand from the seller to draft a simple will. This is very affordable and it’s a great way for a buyer to make sure that when the seller backs out of the sale because he/she passed away, you can still close. Another way would be to oblige the seller to give someone else a full power of attorney to sell as a back-up.

Planning to buy or sell a property in Costa Rica? Then hire the services of an expert real estate agency, contact us now.

The grammar of the Spanish version of this blog was checked and corrected by Wagner Freer of Spanish School for Residents and Expats. We strongly recommend this language school as your best choice to learn Spanish, click here to contact them. 

Spanish School for Residents and Expats


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Ivo Henfling

If you are looking to buy a home in Costa Rica or invest in a condo anywhere in the central Valley, or looking for any property for sale in Escazu, you need to call me. I have been selling real estate in Escazu for over 20 years and can show you hundreds of happy buyers of real estate in Escazu and other areas. To me, a deal is not a good deal unless both buyer and seller are happy.

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