Breach of Real Estate Contract

Breaches of real estate contracts occur when one party fails to perform a contract provision. Buyer breaches include not meeting a loan or physical inspection. Seller breaches may include failing to deliver clear title or statutory disclosures. The parties must follow the method of dispute resolution contained in the contract to resolve contract breaches.

Purchase Agreement Provisions

The following are common purchase agreement provisions:

• Purchase price
• Deposit amounts
• Financing or payment terms
• Items that are included or excluded
• Appraisal and loan contingency
• Inspection Contingencies
• Repair items
• Title policy and title insurance
• Wood Destroying Pest Control (termites)
• Mandatory seller disclosures
• Dispute resolution methods
• Liquidated damages clause

Seller's remedies for buyer's breach:

• Liquidated damages (keeping the initial deposit) and terminating the contract.
• Filing a lawsuit
• Specific performance

The seller also has an equitable lien on the property for any unpaid balance if the property is transferred to the buyer.

Buyer's remedies for seller's breach:

• Money damages
• Termination of the contract, return of the buyer's deposit, and any reasonable fees for reimbursement of title costs, inspection costs and attorney's fees.
• Specific performance

The buyer can also put on lien on the property until the matter is resolved. The buyer must show they were ready, willing and able to close the transaction.

Filing a Legal Claim for Breach of Contract

Legal claims for breach of contract can be resolved through arbitration, mediation or small claims court. In binding arbitration, the arbitrator's decision is final. If mediation is chosen, the mediator does not decide the case, but merely helps the two parties reach a decision. Filing a small claims court action generally involves sums between $5,000- $10,000 depending on your state's laws.

These methods cost less and take less time to achieve results than litigating the matter in court. Purchase and sale contracts usually provide for liquidated damages, which are a specific amount of money awarded if there is a breach. Liquidated damages can be limited to the amount of the earnest money deposit.

Help from a Real Estate Attorney

It is recommended you hire a real estate lawyer to help you resolve a real estate contract breach. A lawyer can be helpful by writing a letter or making a phone call on your behalf or representing you in a court action.