Buyer’s Right to Cancel Purchase Contract Because of “Ghost Rumors”

Question: In a recent column you said that a buyer could cancel a purchase contract for a home within the 10-day inspection period because of “neighborhood rumors about ghosts haunting the home.” Even worse, you said that the buyer could then get his $20,000 earnest money back! We are planning on listing our Sun Lakes home for sale at the end of the summer. If a buyer signs the purchase contract and then comes up with some phony “ghost rumors” reason to cancel the purchase contract and get their $20,000 earnest money back, will we have to go to court with the buyer to at least get the $20,000 earnest money?

Answer: First, the buyer has to act in good faith that “ghost rumors” are the buyer’s reason not to purchase the home. Second, under the standard AAR Purchase Contract, if you believe that the buyer is not acting in good faith, you and the buyer will have to mediate this $20,000 earnest money dispute. Real estate agents and attorneys are rarely involved at this mediation stage. If the mediation fails, and there is no settlement, you and the buyer will then have to arbitrate or litigate this $20,000 earnest money dispute.