Buyer Default On Real Estate Contract
The fact that a home or piece of property has found a willing purchaser and is under contract doesn’t necessarily mean that the sale will successfully close. In some cases, you as a home seller can take legal action if a buyer refuses to complete a sale. Read on to learn more.
Consider Your Goals
It’s wise to stay focused on your top priority as a seller, namely to sell your property . Even if it’s the buyer’s fault that the sale didn’t close, getting your property back on the market may be the best thing to do.
A home seller might potentially do the following if the buyer decides not to go through with the purchase:
- Retain the initial earnest money payment and terminate the contract
- Sue for breach of contract, or
- Bring an action for specific performance.
- Make Sure the Home Buyer’s Action Constitutes an Actual Breach
Home purchase contracts are typically full of potential escape hatches for the buyer. In legal jargon, these are known as “contingencies”.
Financing contingencies are often-seen reasons for canceling a home purchase contract. If the contract is conditioned on the buyer successfully obtaining a mortgage on acceptable terms, and the buyer makes a good faith effort to apply for one but is then turned down, the sale won’t close.
Inspection contingencies also frequently result in deals not closing. Your buyer, if careful, is likely to have insisted that the contract include a clause conditioning the sale on the buyer not only hiring a home inspector, but being satisfied with the results of that inspection. Other contract contingencies can bring about similar results.
Only One Remedy Allowed At A Time
In most situations, an aggrieved home seller can pursue only one legal action at a time. If one remedy fails, though, you might be able to file another lawsuit for a different reason. It is vital to know that if you choose to file a lawsuit, the buyer may file a “lis pendens” in the public records.
Seller Keeps Earnest Money Payment
When the seller is ready, willing, and able to sell the property and the buyer refuses to close on the sale for a reason not excused by a contingency, the seller has the right to terminate the contract and keep the earnest money payment.
Seller Sues for Damages
A seller may bring a lawsuit against the buyer and ask for money damages when a buyer has not done what was agreed to in the contract.
Seller Sues for Specific Performance
A lawsuit for specific performance involves the person claiming a breach of contract asking the judge to order that the transaction be completed according to the terms of the contract.
A court might, however, consider granting specific performance if the contract is clear and definite and an award of money will not return the individuals to the positions they held before signing the sales contract.
Seller’s Lien
In most states, the seller has an implied equitable lien on real estate that has been transferred to the buyer for any part of the contract price remaining unpaid.
Craig Cherney is a trusted client advisor and a sought after real estate lawyer and expert witness who is hired by the nation’s top Real Estate Litigation Attorneys to help resolve their litigated real property matters. Craig has appeared as a testifying expert witness before judges and juries in California, Arizona, Nevada and other jurisdictions across the country. Craig Cherney, Esq. Expert Witness Real Estate. 480-399-2342. If you are litigating an easement case, Craig Cherney might be able to help you advance and win your case.