Selling your home is often a lengthy and difficult process. Once you find a buyer and sign the contract, you are happy to move forward with your plans. Unfortunately, it can be a big disappointment and a financial blow when a buyer defaults on a
contract. As a seller, you do have some options for recourse that you can consider in this instance. It is helpful to seek guidance from a reputable real estate attorney to discuss the situation and learn your particular options.
What Options do I Have?
As a seller, you may have several options available to you when a buyer does not go through with a sale.
Keep the Deposit: The deposit is an important part of the real estate sale agreement. The deposit is also called earnest money. It is money that the buyer puts down to hold the home. You should always ensure that you obtain a deposit that will cover your expenses should the buyer back out of the deal. The contract must be clear about the deposit and you should include a liquidated damages clause in case of a breach of contract. Earnest money is generally a percentage of the purchase price of the property and the buyer often pays it with a check to an escrow agent.
File a Lawsuit for Damages: When the amount of earnest money is too low, or non-existent, you may need to sue the buyer for damages. You may be entitled to collect damages in a breach of contract claim against the buyer. Damages may include your actual losses as well as any price difference between the contract purchase price and the current fair market value of the home.
File a Lawsuit for Performance: In some cases, you may be able to sue the buyer as a way to enforce the contract. Rather than collecting money for a breach, the seller may prefer to require the buyer to go through with the purchase. This option may not be ideal if the buyer breached the contract because of financial reasons.
How to Protect Yourself in a Real Estate Transaction
It is almost always easier to protect yourself up front than to try to resolve a difficult situation later. Always ensure that you and the buyer sign a written real estate contract. The contract should provide specific details for how to handle a breach.
The earnest money is a way to ensure that the buyer will not breach the contract. If the deposit is too low, it may not cover all of your expenses in case of a breach and the buyer may not have an incentive to follow through with the purchase. Have a skilled real estate attorney draft and/or review the contract before you sign the document.
Real estate transactions can be complicated and disputes can be difficult to resolve. You can get the help you need from our experienced real estate legal team. Contact Moen Sheehan Meyer, Ltd. to discuss your real estate contract needs today.