When a buyer fails to close on a property after signing a contract, it is crucial to understand the implications of such a default and the available remedies for the seller. This situation is referred to as a breach of a real estate contract.
In the current real estate market, there may be instances where buyers default due to various reasons, such as a property not appraising at the agreed-upon value, changes in personal circumstances, or financial issues. In these situations, sellers must be aware of their options.
One essential aspect for sellers is to require a substantial deposit from the buyer, typically 5% or 10% of the total purchase price. If the buyer defaults, the seller may have the right to claim this deposit as liquidated damages, as specified in the contract. The seller can then retain the deposit and proceed to sell the property to another buyer. But things are never that simple. Most times the contract will be contingent on the buyer attempting to obtain financing in good faith. So even if the Buyer defaults there could be an escrow dispute.
In some cases, depending on the contract’s terms, the seller may be able to pursue additional remedies. However, most contracts limit the seller’s recourse to liquidated damages, which involves retaining the deposit. It is crucial for sellers to ensure their contract provides an adequate deposit amount, so they feel comfortable keeping it if the buyer backs out and also making sure the buyer has the ability to close. .
Both sellers and buyers should have legal representation during real estate transactions to protect their interests. A title company can also assist in the process, providing additional support to buyers and sellers.
If you need legal representation or assistance with a real estate transaction, consider contacting Oppenheim Law at 954-384-6114 for more information or to schedule a consultation.