FACTS: A buyer and seller entered into an Arizona REALTORS® Residential Resale Real Estate Purchase Contract (the “Contract”). The buyer received notice that the appraisal came in low and decided to cancel. The buyer’s agent telephoned the listing agent and notified him that the buyer was cancelling. The seller is now making a demand for the earnest deposit because the buyer did not cancel in writing within five (5) days.

ISSUE: Can the buyer verbally cancel the contract?

ANSWER: No.

DISCUSSION:

The cancellation of the Contract needs to be in writing and therefore, a verbal cancellation would be ineffective. Section 2l of the Contract states: “Buyer has five (5) days after notice of the appraised value to cancel this Contract and receive a return of the Earnest Money or the appraisal contingency shall be waived…”

Further, Section 8l of the Contract states: “Cancellation: A party who wishes to exercise the right of cancellation as allowed herein may cancel this Contract by delivering notice stating the reason for cancellation to the other party or to Escrow Company.” (emphasis added.)

Finally, Section 8m of the Contract states: “Notice: Unless otherwise provided, delivery of all notices and documentation required or permitted hereunder shall be in writing …” (emphasis added.) Therefore, to be effective, the notice of cancellation must be in writing.