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Esign contract termination letter

hi everybody Dana sparks Broker of maximum one Greater Atlanta Realtors in today's contract tip is all about contract terminations versus the disbursement of earnest money so for whatever reason there seems to be a lot of confusion in our marketplace regarding these issues so let me start off by saying that these are two completely separate yet related but they are completely separate contractual issues one issue is the termination of a contract the other issue is the release of the earnest money that is on hold per that contract so they are related but they are separate so first of all for the actual forms themselves for the GAR purchase and sale agreement the are for the GAR contract forms I should say the actual TNR that we that we refer to euphemistically and the T stands for termination and the R is for release of earnest money that is on gar form F 522 and the name of the form is actually the unilateral notice to terminate purchase and sale agreement and propose disbursement of earnest money so in gar in the Georgia Association of Realtors forms they handle these two different issues on one form in the also gar has a form for a mutual termination and release of the earnest money and that is gar form F 5 1 9 and is called the mutual agreement to terminate purchase and sale agreement and dispersed earnest-money mutual agreement in the re contract package these two issues are handled on two separate forms so in the re contract package there is form re 263 which is the notice to withdraw or terminate and then our e-form to 1/2 which is the agreement to disperse trust funds so first of all let me back up and say I have done several contracting videos on terminations and releases and I did one relatively recently on seller terminations contractual terminations of a contract now the other thing I want to say is a termination of a contract is done by notice and all notices are unilateral so you only need one party's signature to terminate a contract and once a contract is terminated it is dead it is terminated you cannot amend a terminated contract to bring it back to life so as an agent when you are interacting with your clients and customers and one of the parties wants to terminate a contract and then a day or two later you want to revive that contract you need to start all over with a brand new country once it has been terminated by the parties it is terminating you need to start all over with a brand new contract if you are representing a buyer and the parties terminate a contract and then the buyer wants to revive that contract for the buyer and the seller want to revive that contract you may have some issues with the lender regarding a new purchase and sale agreement and the buyer might have to wait 30 days or so depending on the loan the loan type and so forth and so on so before party terminates a contract there are a lot of discussions that need to occur between the parties with the agents with the lenders title search so forth and so on especially with the lenders so once the contracts terminated its terminated and the issue is and anybody can terminate a contract buyer or seller the issue is the other related but separate contractual issue which is the disbursement of the earnest money so who is entitled to the earnest money who the the term of a contract is unilateral meaning you only need one party signatures however in order for a holder to disperse the earnest honey the holder must have agreement the holder must have a document signed by the parties that have an interest in those funds which is the buyer and the seller agreeing to the disbursement of the earnest money now the Vienna seller can agree to disperse those funds however they choose all to one party all to the other party split it up whatever if the holder of the earnest money gets that in writing then the holder disperses of the funds regardless of the circumstances surrounding the termination if however we the holder does not get a written agreement signed by the buyer and the seller agreeing on directing the holder how to disperse those funds then there are a lot of issues or a lot of remedies allowed for the holder to figure out how to disperse those funds the most common one is what we call the ten-day letter and I've done videos on this where the holder interprets the contract makes a decision as to why did it fail to close or why did it terminate the party that terminated did they terminate by an unexpired agreed-upon contractual contingency or did the party that terminate terminate by default so those are issues for the interpretation of the contract now one note on this before I go any further if it is an all-cash contract and the closing attorney is holding the earnest money and the parties are binding on a gar purchase and sale agreement then regardless of the circumstances surrounding the termination or the failure to close all cash contract closing attorney holding the earnest money the closing attorney is not allowed to use this ten-day letter and interpret the contract closing attorney must interplead those funds into a court and let a judge decide that does not come for free there are costs associated with attorneys fees to file the motion to interpret the funds court costs filing fees so forth and so on and all of that money does come out of the miss money so just make a note when the buyer and seller choose to have a closing attorney as the holder of the artists money the cash deal if there's an issue and we don't get the closing attorney doesn't get agreement it's going to have to be interplay if they're binding on a guard contract okay so now let's go back to this again the once its terminated its terminated it's done by notice therefore its unilateral the questions come in regarding the disbursement of the earnest money if the parties don't sign that agreement to disperse the earnest money then contract interpretation occurs so before we even get to there if you are let's say that a let's say a buyer terminates a contract and in the form they they terminate the contract so it's dead and in the proposed disbursement of the earnest money the buyers states that the buyer will get the earnest money back the seller however disagrees the seller thinks that the buyer terminated outside of the contingency and the seller thinks that the seller should get the earnest money as liquidated damages per default I'll get to that in a second well if you're representing the seller and you receive a TNR and the proposed disbursement of the earnest money you don't agree with you don't do another TNR it's already terminated all you do is you don't sign that proposed disbursement of the earnest money and you let the holder know the earnest money is in dispute but you don't execute a new TNR and that's ridiculous it's already terminated what is that odds is the the handling of the earnest money and there are other contractual as well as licensed law provisions for the holder to disperse those funds into a process to figure that out but so you would just not have the seller sign that or if it's the other around just don't have your party sign the agreement to disperse the trust funds let the holder know it's in dispute and then the holder does their job as prescribed in the contract and if the holder is a broker by licensed law the holders a closing attorney unless they hold a real estate license they are not held to license law so the other thing why this is import is let me point out to you in the guard purchase and sale agreement as well as in the re forms purchase and sale agreement the default clause so in paragraph in the guard purchase and sale agreement which is F 201 and the default clause is in paragraph B to default the remedy for the seller the sole remedy for the seller if a buyer default is the earnest money as liquidated damages if a buyer defaults on a purchase and sale agreement so if the seller defaults on a contract the remedies for the buyer is the buyer can terminate the contract get their earnest money back and go about finding another property or they can seek specific performance meaning they file a lawsuit against the latter if it's a lawsuit I guess it is a lawsuit they file a suit with a court and a judge decides if the seller must honor the contractor now it's not for free the buyer soul has to pay for it but that's what specific performance is now and that is in the GAR contract it also says attorneys fees in any litigation or arbitration arising out of this agreement including but not limited to breach of contract claims between buyer and seller and commission claims brought by broker the non prevailing party shall be liable to the prevailing party for its reasonable attorneys fees and expenses now in the re forms contract it is under the standard terms which is already won and again it is in paragraph 10 under default and same thing if a buyer defaults the seller sole remedy and this was changed in 2019 in the re first contract is the earnest money as liquidated damages and should the seller default the buyers remedy either is to get the earnest money back or to pursue a specific performance case against the seller so that's why this is important it's not just earnest money and also under default let me let me go back to that the party that terminates a contract if they terminate by default the brokers may also pursue the defaulting party for Commission so it's not just artists money the defaulting party if there is a termination by default are also potentially liable for commission to both brokers as well as attorneys fees if it does go to litigation and a party loses so let me give you a couple of cases why I'm bringing this issue up as a video we've had for whatever reason there have been a bunch of contracts that have terminated by a seller terminating the contract and like I said I did a lot I did a previous video tip not that long ago on contractual reasons a seller can terminate once a seller is has signed to purchase and sale agreement there are very few contractual termination rights for a seller nevertheless a seller can terminate a contract the issue is did they terminate by default or did they terminate by an agreed-upon contingency or an other lawful reason so for example there's one where the seller terminated the seller was a new construction builder and the seller terminated the contract and because the buyer had become very difficult to deal with the buyer had become so difficult to deal with that the seller actually had given notice to the buyer that the buyer was no longer allowed on the property and should the buyer show up on the property that they would file a criminal trespass warrant against or order against the buyer so at that point the seller did terminate the contract there was no contractual right for the seller to terminate so the seller nearly terminated by default nevertheless once it's done it's done now in that case I believe the seller did agree to give the buyer back not only the earnest money but all the quote-unquote non-refundable security deposits the seller even the Builder gave the buyer back those funds as well there was another one where seller another new construction terminated the contract did they terminate by an agreed-upon contingency no the seller terminated by default and the reason was the seller just decided to not build in that subdivision or in that area anymore so in that situation again even though the seller terminated by default in the agreement to disperse the trust funds the seller was giving the earnest money back to the buyer the buyer signed it even though it was a default it was done the issue is well let me give you another one there was another one where another new construction issued the seller terminated and the reason was because the zoning of that area changed and the seller was now prohibited by the zoning regulations and could not build so that one terminated for other lawful reason not a default the buyer got the earnest money back and went and found another property um there was another one where a seller terminated by wrote an offer seller wrote what they thought was a counteroffer and instead of writing it on a counteroffer form the seller did the mark through initial date and time sent it back to the buyer however through the electronic they did it through one of the e sign systems and in that system there was nothing was marked through so they just sent it back it got bombed and the parties are under contract the seller then realized that they were under contract for a different price than what they thought they had made a counteroffer to I don't know the seller didn't use the counteroffer form but nevertheless so the seller terminated clearly seller terminated by default the issue is the agent the buyers agent called me up and said the seller can't terminate and I said yes they can and the agent says no they can't and I said yes they can once it's terminated its terminated the issue is was a determination by a contingency or was a determination by default clearly it was a termination by default and then so then what gets negotiated or decided by the holder is the disbursement of the earnest money based on the party that terminated by default but the agent said no it's not a terminated contract because the seller can't terminate well yes it was a gun deal it was a dead contract once a seller sent over sinus and over that notice of termination so just because a party terminates by default meaning outside of a contingency timeframe or for no contractual reason it doesn't matter again that the consequence of that is the dispersal of the earnest money which is a completely separate issue but once it's a done deal it's a done deal there was another issue where again we had a seller a seller terminated and the issue was they have received the buyer they were under contract and the buyer was getting a VA loan and the form of the earnest money was in a personal check rather than in certified funds so the seller terminated well that that was the self there was no termination rights built in to the form of the funds this goes back to another issue that I've talked about about don't write any special stipulations because they typically don't have the time frames notices and consequences built in that you guys do there was another one where oh there was another one where the party terminated it was under financing identity the buyer terminated the buyer sent over the loan denial letter and the seller did not agree with the reasons of the loan denial letter so in that situation the seller did not sign the TNR so the holder had to go through the ten-day letter interpretation process and just because the seller doesn't like the reason if the contractual obligations for termination and for contingencies were met then the buyer has had terminated by and agreed upon contingency so my point is is a couple things number one termination is unilag it's done by notice there 14 a lateral you only need one party signature to terminate once it's terminated it is terminated it cannot be revived a terminated contract may not be revived by amendment you need a whole new contract so if a buyer is getting an FHA or VA or USDA loan that could cause a whole set of issues for that buyer they may not be able to write a new contract on that same property for a sixth ended period of time so be leery of that before terminating a contract the second thing is a seller or a buyer either party may terminate a contract even by default so even though there's no contractual provision for that termination then if it is a default then again that has consequences on the earnest money but not on the contract once it's terminated its terminated the other thing to consider is if you have an attorney holding the earnest money and it's cash then the interpretation process is not available to that attorney to decide the disbursement of those funds and the other thing is if a party does terminate by default if it does not only is that the earnest money that can be dispersed has liquidated damages but the brokers the selling broker in the listing broker may pursue if it is a termination by default may pursue the defaulting party for Commission so just a couple of issues now one more thing oh and specific performance so just one comment on specific performance if there is a suit from a buyer against a seller for specific performance if a seller does default or there is a perceived default if they if a seller terminates a contract by default and a buyer is going to seek specific performance to get a judge to decide if the seller does have to actually go through with the contract one of the things that may happen is the buyer would file and there may be a different specific legal name for it but the buyer would in essence file an injunction against the seller preventing that seller from selling the property to another buyer until this specific performance lawsuit has been heard so there are a lot of other issues if the buyer and seller are involved in an issue where especially where specific performance where a buyer is going to seek specific performance against a seller then definitely they would want to get legal advice but nevertheless the point in this contract tip was just to point out to you as an agent there are a lot of issues to consider before a party actually terminates a contract there's time frames contingencies forms of notice and the consequences of a termination and just because a party does not have a contractual contingency under which to terminate the contract can protect their interest or protect your earnest money doesn't mean that it still cannot be a termination by default again please check out some of the other videos in the playlist section under earnest money and check under videos I have done several videos on terminating contracts thank you guys so much for watching comment below what do you think thank you for watching dang sparks Broker of maximum one Greater Atlanta Realtors satisfying your needs with service innovation and education you