In times of market uncertainty, both buyers and sellers may face unforeseen challenges that can lead to decreased home values or even deal cancellations. Buyers, dealing with personal impacts of economic volatility, might need to break agreements more frequently. At the same time, sellers may need to adjust their expectations regarding their home’s selling value. So, what happens when a real estate deal goes awry?
Here are five essential lessons for buyers and sellers to consider when facing challenges in any real estate transaction:
1. Consequences if Buyers Cannot Close: If a buyer fails to close on a home with an agreed-upon sale price of $800,000, the seller will relist the property. If the subsequent sale is for $750,000, the seller can sue the original buyer for the $50,000 loss, plus interest and legal fees.
2. Disposition of the Buyer’s Deposit: The buyer’s deposit is held in the listing brokerage’s trust account. The seller must sue to recover it. Even if the seller sells the property for the same price or higher, without incurring a loss, they can still sue and retain the buyer’s deposit.
3. Buyer Changing Mind About Deposit Payment: If a buyer signs an Agreement of Purchase and Sale but decides not to pay the deposit, the consequences remain the same. The seller can sue for any loss on the resale and the unpaid deposit.
4. Collecting Owed Amounts After Winning a Lawsuit: Collecting owed amounts after winning a lawsuit against the buyer can be uncertain. Each buyer’s situation is different, and obtaining a court victory may take years. Sellers must pay legal fees upfront, and even after a judgment, the buyer might have disappeared or lack assets to satisfy the judgment. Careful consideration is crucial before deciding to sue.
5. Negotiating an Extension of the Closing Date: An extension can be a beneficial solution for both parties. Buyers gain more time for financing or selling their current home, while sellers can negotiate terms such as an additional deposit, interest on the outstanding balance, or the immediate release of the initial deposit. This positions the seller more securely if the buyer still cannot close on the newly extended date.
