In today's dynamic real estate market, securing a ratified contract is a major milestone. However, the journey from "under contract" to "closed" is not always a straight line. We are seeing an increasing number of buyers who, after the initial excitement, begin to get cold feet. For sellers, understanding the ramifications of this can be crucial, as the rules of the game shift dramatically once the contract is signed.

The Seller's Limited Control

Once a purchase agreement is ratified, the seller's ability to simply cancel the contract is very limited. The power to terminate a contract largely rests with the buyer during their contingency periods (inspection, loan, appraisal, etc.). A seller cannot walk away from the deal just because the buyer seems hesitant or delays communication. The seller is now legally obligated to perform, and their recourse for a buyer who is dragging their feet must follow a specific legal process.

The primary tools a seller can use to push the transaction forward are the Notice to Perform (NBP) and the Demand to Close (DTC). These are formal notices, often based on forms provided by the California Association of Realtors (C.A.R.), that officially document a buyer's failure to meet a contractual deadline.

• Notice to Perform: If a buyer fails to remove a contingency or make a deposit by the agreed-upon date, a seller can issue an NBP. This gives the buyer a specific timeframe (usually 2 days) to fulfill their obligation or face a contract cancellation.

• Demand to Close: Once all contingencies have been removed, if the buyer fails to close escrow on the scheduled date, the seller can issue a DTC. This is a final demand, giving the buyer a short window to fund the loan and close the transaction.

The Problem of the Missing Earnest Money Deposit

One of the most significant issues we're seeing in this market is buyers failing to submit their earnest money deposit (EMD). A fact from the California Association of Realtors (C.A.R.) is that the EMD is the primary source of liquidated damages for a seller if a buyer defaults on the contract. Without an EMD in escrow, a buyer has very little financial recourse.

This means a nervous buyer can, in effect, walk away from the deal with minimal financial consequence, leaving the seller with a canceled contract and wasted time. While the seller may have a legal right to sue for damages, the absence of an EMD makes it a far less attractive and often impractical option. The seller's best path forward is often to cancel the contract and get the property back on the market as quickly as possible.

The Reality of "Cold Feet"

The reasons for a buyer's anxiety are varied and are often a direct result of market conditions. Rising interest rates, a surprising home inspection report, or simply the weight of a significant financial commitment can cause buyers to reconsider their decision.

For sellers, this phenomenon highlights the importance of a skilled real estate professional who can not only attract a buyer but also vet their qualifications and guide the transaction with confidence. A knowledgeable agent will know when to issue a Notice to Perform, ensuring the process stays on track and protecting the seller's interests from the very beginning.

Ultimately, while a ratified contract is a reason for celebration, it is also a time for vigilance. Understanding your rights and the proper procedures for addressing a hesitant buyer is the best way to safeguard your sale and ensure a successful closing.