Client backing out of a deal? You probably have some questions…

There’s no easy way around it – being told by a client that they won’t be moving forward with a firm deal is never a stress-free moment. You might find yourself wondering, “Did I do something wrong?”, “Can I fix this?” or “Should I fix it?”

Don’t worry, we’ve received calls from other real estate agents with those very questions, and here’s what we think you should – and what you definitely shouldn’t – do when you get the dreaded news that your clients are “backing out” of a deal.

Step #1: Tell your clients to get legal advice (do this quickly and in writing)

We get it—alarm bells are sounding in your head, and it’s hard to know exactly what your next move should be. But the very first thing you should do is advise your clients in writing that there can be serious legal consequences to not completing the deal and that they should immediately seek legal advice before taking any further steps.

Contract law is complex, and only a legal professional should be advising your clients on the potential legal consequences, any legal remedies that may be available, and the legal position that your clients should take. After all, your clients can only make an informed decision if they’ve been advised of their options and the potential outcome of those options.

Step #2: Be mindful of what you say and who you talk to (you CAN make it worse)

Some people are used to talking their way out of sticky situations, but sometimes saying less is more. Without your clients’ express instructions, you should NOT be telling the opposite side of the deal that your clients are unable or unwilling to complete the transaction, or that they want to renegotiate the terms of the deal. There have been cases where this type of communications has formed the basis of an “anticipatory breach” and given the other party an immediate option to terminate the contract!

Remember, you owe a duty of confidentiality to your clients, and disclosing your clients’ confidential information (e.g. that they are unable or unwilling to abide by the terms of the deal, their reasons for not completing the transaction, etc.) can make things worse for them and inadvertently put you in the position of having to defend yourself in possible legal action later.

Step #3: Don’t play lawyer

Your clients may want you to be their lawyer and have you solve their contractual problem. However, it’s a real challenge to navigate a deal gone sideways without falling into the many legal traps.

Your clients may have legal remedies or none at all. There may be legal arguments that allow your clients to walk away without consequences, or there may be steps they can take to mitigate their losses. Either way, it’s important that you don’t put yourself in harm’s way by stepping outside of your expertise (e.g. by acting as your clients’ lawyer or providing legal advice).

Remember, it is NOT your duty to be a “jack of all trades”, but it IS your duty to act with reasonable care and skill and in the best interest of your clients. Knowing where your expertise begins and where it ends is a key part of that duty.

Step #4: Stay somewhat out of sight, out of mind

After you’ve advised your clients to seek legal advice and avoided dispensing any legal advice or opinions of your own, stay clear of what is likely a complicated legal issue. Continue to follow your clients’ lawful instructions and deliver messages that they’ve asked you to deliver (preferably after they’ve received legal advice). However, be mindful not to contradict the advice/guidance that your clients have received from their legal professional or provide unsolicited commentary or opinions. Unnecessarily injecting yourself into a legal situation can put you and your clients at risk and can bring unwanted attention to yourself.

Step #5: Don’t admit liability

While you may feel like you’ve had a hand in creating a situation where your clients are contemplating stepping away from the deal, there can be many reasons why you may not be legally responsible. So, it’s important that you don’t admit any fault or liability as this can affect your E&O coverage if a claim is made against you. While expressing sympathy for a less-than-ideal situation can be appropriate, admitting that you should’ve or could’ve done something differently usually isn’t helpful. Instead, channel that energy into ensuring that your clients have the appropriate professional support that they need to make their next move!

Stick to your lane, tell your clients what they need to hear

As a real estate agent, it’s not your role to ensure that the parties complete the deal. The best way to support your clients may be by telling them what they need to hear and not what they want to hear. Being mindful of your role as a real estate advisor and not a lawyer will help you and your clients avoid trouble.

If you’d like to learn more about anticipatory breach or what might “open up” a contract see:

• “Anticipatory breach: words matter” Morgan Stern’s September 2024 Risk Report article
• Asked and answered – What opens up a contract? December 2024 Risk Report