Consequences Of Breaking A Real Estate Contract
There is a period of due diligence following the signing of a real estate contract. Once the period of due diligence has expired, what do you do then if you desire to break the established contract? It is no surprise that real estate contracts are tough to break away from. Read on to learn what you can expect should you break the established real estate contract.
When You Buy
Here is some of what you may face when you happen to be a buyer who breaks the terms of a real estate contract:
You may be on the hook for the ownership expenses of the seller such as maintenance, taxes, and mortgage payments incurred after the failed closing date.
Any money you have spent on the home will be lost as will any earnest money deposits.
Breaching the contract means the seller could sue you and collect damages and a judgment.
There should be a method of dispute resolution in every real estate contract that can assist both parties, minimizing the chances of needing to attend court.
When You Sell
If you break the contract as a seller, the following may happen:
Refunding the money given as earnest money deposit by the buyer when negotiations first got under way
Be forced to complete the transaction with the buyer
The buyer may sue you for breach of contract in a court of law and seek an award of attorney’s fees and costs if you lose
Renegotiation of the contract is a possibility. If the sale does not complete, you may also be sued for time lost and lost commissions otherwise earned by the assigned real estate agents.
Breaking Contracts
There are other occasions where real estate contracts may be broken without legal consequences. Always thoroughly read the contract and understand prior to signing. You can also add in conditions whereby certain criteria have to be satisfied or the parties may back away without further legal action being undertaken. For example, if an inspector finds a fault in a home inspection. Known as contingency clauses, they can be of great assistance in walking away from a planned real estate acquisition.
Source: “What Are the Consequences of Breaking a Real Estate Contract?” SmartMortgage, 6 May 2016, https://smartmortgage.com/what-are-consequences-breaking-real-estate-contract/
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