A seller may sue the buyer for backing out if they breach the contract. While there are several contingencies to protect buyers in most agreements, they still may violate the commitment by getting cold feet or letting deadlines pass.
- If the buyer breaches, then the seller may take the earnest money and/or sue
- In most cases, the seller cannot force the buyer to close
The seller does have a few options if they feel the buyer acted in bad faith. They can take the earnest money deposit (EMD)or sue. However, they still must put the house back on the market and begin the process again.
What Happens if a Buyer Breaches a Contract?
If the buyer breeches a contract in real estate, the seller may claim the earnest money. This is not always as straightforward as it sounds, though. The contingencies that protect the buyer may leave ambiguity in sometimes.
A good example of this is the inspection clause. It allows the buyer to have a professional come in and examine the structure to make sure that no problems exist. Most contracts are ambiguous enough that almost anything can trigger this. It can be difficult for the seller to adequately show the seller breached the contract, so long as the buyer decides within the time allowed.
What happens to EMD then? Moshes Law tells us that if the buyer presents adequate documentation that triggers a contingency within the allotted period, they get their deposit back. However, if the buyer fails to act in a timely manner or provide adequate documentation, then the seller may claim the earnest money deposit.
Can a Seller Force a Buyer to Close?
It is rare that a court will allow a seller to force a buyer to close a real estate contract. It does happen, though, and it is called specific performance. However, sellers are more successful suing for specific performance in other types of sales than in real estate.
This is because of the contract structure. Residential real estate agreements start with a generic document and add clauses for specific issues important to the two parties. One contingency is for EMD. It usually stipulates how much and when it is due. Therefore, the seller already has remuneration should the seller get cold feet. The contract provides two avenues for the homeowner to recover damages if the purchaser breaches:
- Take the EMD
- Sue for damages
In almost all cases the homeowner takes the earnest money and puts the house back on the market. There are times it goes to court, though. One obvious case is where the buyer breaches the contract by failing to provide EMD on time. Obviously, the seller may choose to sue the buyer in this case.
Lawyers.com tells us that lawsuits are not common, and suits for specific performance are even less common. The reason is that it is not a contractual right. Courts rarely grant this because they view forcing someone to buy and move into an unwanted house is extreme. Having said that, there may extenuating circumstances where the court may grant specific performance.
Final Thoughts About Can a Seller Sue the Buyer for Backing Out
A seller can sue a buyer for backing out of a real estate contract. However, it should be a last resort. In most cases it is better for the owner to take the EMD and put the house back on the market as soon as possible.
If you bring a lawsuit the buyer may file a Lis Pendens. This is a legal notice that state the property is involved in a lawsuit. Practically, this means that you will not be able to close on the property until the suit is complete, and that may take some time. It also has the effect of discouraging any potential buyers for making any offers.
Therefore, it is always better to make sure that the purchaser provides adequate earnest money up front. Make sure you get the EMD on time, and if they back out take the money and find another buyer as soon as possible.