5 Things for Buyers and Sellers to Remember When Things Go Wrong with Their Real Estate Agreement
When market conditions get rocky, both buyers and sellers in the market will begin to experience unexpected challenges that can lead to decreases in home value as well as challenges that lead to a deal-breaker. Buyers in the real estate market will more commonly need to break their agreements as they handle the personal impacts of the looming recession and economic volatility. Sellers may adjacently need to curb their heightened expectations of the selling value of their homes. So, what happens when a deal goes wrong?
Here are 5 key lessons for buyers and sellers to remember when things go wrong in any real estate deal:
When market conditions get rocky, both buyers and sellers in the market will begin to experience unexpected challenges that can lead to decreases in home value as well as challenges that lead to a deal-breaker. Buyers in the real estate market will more commonly need to break their agreements as they handle the personal impacts of the looming recession and economic volatility. Sellers may adjacently need to curb their heightened expectations of the selling value of their homes. So, what happens when a deal goes wrong?
Here are 5 key lessons for buyers and sellers to remember when things go wrong in any real estate deal:
1. What happens if the buyers cannot close
If the buyer cannot close and their sale price was $800,000.00, then the seller will put the home back on the market to sell it again. If the seller then resells for $750,000, then the seller can sue the buyer for the full $50,000 loss, interest and legal fees.
2. What happens to the buyer’s deposit when the buyer cannot close?
The buyer’s deposit remains in the listing brokerage’s trust account. The seller has to sue to recover it. In the above situation, if the seller sells for the same price, $800,000, or even more than $800,000, and suffers no loss, they can still sue and win the buyer’s deposit.
3. What if a buyer signs an Agreement of Purchase and Sale but then changes their mind and does not pay the deposit at all?
If this happens, it is, unfortunately, the same result for the buyer. The seller can still sue the buyer for any loss on the resale and can also sue for the deposit that was not paid.
4. Will I collect what I am owed if I win the lawsuit against the buyer?
This is not an easy question to answer. Every buyer is different, and it may take years to obtain a court victory. The seller will have to pay their legal fees up-front for this. Once the judgement is achieved, it is possible that the buyer may have disappeared or have no assets to satisfy the judgment. This is why you must carefully consider whether you want to sue in the first place or whether it may make more sense to settle for a lesser amount and move on.
5. Is it a good idea to negotiate an extension of the closing date?
An extension is usually a good solution for both the buyer and the seller. Buyers will benefit from more time to either arrange their financing with a suitable lender or to sell their current home if that is holding them back. Sellers can negotiate the terms of the extension. For example, sellers may ask for an additional deposit, interest on the outstanding balance and even the immediate release of the initial deposit. This puts the seller in a more secure position if the buyer still cannot close on the new extended date.
