This article was originally published in the NABOR Magazine. You can view a copy of that magazine here.

When the Deal is Dead

Hand deposit issues over to an attorney and focus on your daily business

When I have professional pictures taken, I quickly forget how to act naturally, leaving the photographer to direct me how to smile, where to look, and where to put my hands.

I feel this may be similar to what happens the day after a deal falls apart, leaving the listing agent to ask, “What do I do next? How can I help? Is this where I play lawyer and fight for the

deposit?” The answer is simple: Relist immediately, and let the lawyers work on the deposit. In other words: Act naturally and sell.

The Issue

The confusion begins when a buyer terminates. It may still be uncertain as to what happens with the deposit, consuming all parties involved for days or even weeks. In the confusion, the REALTOR® can get pulled into the discussions, being used to act as a middleman or consultant.

This middle ground is the most dangerous. We are reminded daily that REALTORS® must not give legal advice, but it almost feels like a requirement when your contract terminates. It’s tough! It can feel even worse, even more of an obligation, if you feel partly responsible for the termination. But let’s check the rules…

The Rule

All Naples Area Board of REALTORS® (NABOR®) contracts include the following language:

NOTE 1: Other forms, such as the Florida Realtors®/The Florida Bar (FAR/BAR) contract, are different.

The remedies granted to a buyer are different than those granted a seller under NABOR® sales contracts. Noticeably, a buyer may bring an action for specific performance, damages, or may terminate (Lines 489- 500). Specific performance is an equitable remedy wherein the buyer can force the seller to sell.

Why would a buyer be entitled to specific performance, but a seller is not? Property is unique! Though a seller can get money from any buyer, the property in question may be special and irreplaceable for reasons such as location, views, or even natural resources.

NOTE 2: A cloud on a title can occur when a lis pendens (pending lawsuit) is filed against a property. This “cloud” can make it nearly impossible to sell to another buyer without getting it dismissed.

Another rule to consider: The Multiple Listing Service (MLS) states the cancellation of any sale shall be entered into the MLS database within three (3) business days. It may be an easy determination if, for example, the buyer timely exercised a contractual right of termination prior to the expiration of buyer’s due diligence period in an “AS IS” sales contract. The listing agent should relist immediately and try to find another buyer.

Analysis / Strategy

We’ve identified the issue, we know the rules, but why is this still so difficult? Lawsuits can be unpredictable, possibly even tying up property unnecessarily, or even worse, maliciously. The following items must be considered:

1. Who terminated? Why did they terminate? When did they terminate? How did they terminate?

A seller terminating is very different than a buyer terminating. Because NABOR® gives a buyer the right to sue for specific performance, a listing agent must be careful before relisting a home immediately after a seller termination—even if seemingly reasonable. A buyer may have terminated because they felt they were protected under a contingency or due to a seller misrepresentation. If the buyer later discovers that they were deceived into terminating, the buyer may bring suit.

2. What are the seller’s motivations? Do they still want to sell? Do they need to sell quickly? Can they hold out for more money? Should they hold out for more money?

There have been transactions wherein the buyer terminates, but the seller decides not to relist. The hope was that they could convince the buyer to go back under contract. Relisting could have soured the buyer on the property and harmed the seller’s goodwill in negotiations.

3. What does their attorney suggest?

This part might be the most important and is at the forefront of all issues: You cannot practice law as a REALTOR®. Referring your customer to an attorney for legal advice is the prudent and necessary thing to do.

Conclusion

Realistically, the strategy involved with relisting can be complex and require dynamic strategizing. At the core of the issue, it is important to remember that the deposit and the sale may become separate issues if one of the parties terminates the contract. When that happens, you should hand off the deposit dispute to an attorney and get back to selling. Act naturally!

Christian Ross, Esq.

Ross Law | Ross Title

A special thanks to William Morris, Esq. for co-writing this article with me. Bill and I are both members of the NABOR Legal Forms Committee in 2024.