Monday, March 11, 2019 / by Elizabeth Sorensen
I recently had a Buyer who, several days after negotiating a purchase price for a home and then signing a contract, had the seller decide that they didn’t want to sell their house after all.
The Sellers had been going through a messy divorce for about a year, and now had started working things out. Now that they were getting back together, they decided they didn’t want to sell their home.
Once the buyer and Seller have a mutually accepted contract for the sale of a home, may the Seller change their mind and decide not to sell? What are the ramifications to the seller if they indeed refuse to sell? Unless the seller has a contingency in the contract that allows for them to terminate- such as a short sale contingency, then the seller will be in breach of the purchase and sale agreement if they refuse to close the transaction. The Buyer will have a claim against the Seller, which will have the potential for “Recovery” either in the form of damages or “Specific Performance.”
Damages could include anything from out of pocket expenses the Buyer has already made in order to pursue the purchase of the property- home and sewer inspection fees, appraisal costs, travel expenses, all the way up to loss of “benefit of Buyer’s Bargain” which is the legal jargon that means the difference between the amount that the buyer agreed to pay for the seller’s property and the amount that the Buyer would now have to pay for a similarly situated property.
For example, if the Buyer has a good deal for the Buyer’s property and the Buyer would need to now pay an additional $20K to get something similar, if the seller breaches they would now have a damages claim for that $20K.
Of course I am speaking in generalities as with all litigations there is no case that can’t be won OR lost.If you are buying a home and there is ever an indication that the seller may even be considering NOT performing on the contract, it is imperative that you seek legal counsel immediately. Doing this, can educate you on the best course of action.
As the Buyer, if you continue to proceed through all of the same steps moving toward closing and sign the closing documents. This can act to “preserve” your claim against the seller. Speaking with your lawyer is going to verify if this is the best plan for your particular situation.
As the seller, if you are even considering breaching contract and not selling your home, the same applies to you. There can be, and have been, serious ramifications to refusing to perform as agreed in the contract. The seller should be worried about liability claims from not only the Buyer but both Brokers as well. Both Listing and Selling Brokers have a claim to a commission from the Seller on this fully executed Purchase and Sales agreement. Based on the listing agreement language, the seller has already agreed to compensate both brokers in this transaction.
Life does happen and situations can change causing the seller to change their mind. However, remember a purchase and Sales agreement is a legally binding contract and should be treated as such.
If you have any further questions about this or any other real estate questions, please reach out to me at 509-844-6539.