Legal Remedies For Home Sellers When Buyers Breach Contracts

Legal Remedies For Home Sellers When Buyers Breach Contracts


Getting to the finish line of the sale of your home can feel quite exhausting – especially if something goes wrong, like the buyer violating terms of the contract. 

When a home buyer makes a decision to put their signature on a residential real estate contract, they give the earnest money deposit as well as the contract to the listing agent. The earnest money deposit stays in an escrow account until the sale is closed or a contract breach occurs. Obviously, you never want to experience the latter, but it can happen, and we want you to be educated and prepared. 

Let’s discuss the legal remedies available to a home seller when a home buyer breaches their contract.

Understanding the Buyer’s Role in Breaching a Contract

If an actual breach of contract has taken place on the buyer’s end – meaning they have failed to fulfill their obligations or performed their duties improperly – you as the home seller have legal remedies available to you that you may pursue. 

But first, you should know what happened and how the buyer is in breach. It may be one of the following situations:

  • Bouncing or failing to make the earnest money deposit 
  • Non-cooperation in the transaction regarding pre-closing matters
  • The warranties and/or representations turn out to be dishonest or inaccurate
  • Withholding of documents from the mortgage lender before the issuance of the mortgage commitment letter
  • Failing to appear and/or refusing to sign closing documents at the closing


Keeping the Earnest Money Deposit

If the seller is ready, willing, and able to sell the property to the buyer, but the buyer defaults on the contract, you may be legally entitled to keep the earnest money deposit. 

Note that the refusal of the home buyer to close the deal has to be inexcusable by all contingencies for you to earn that right. You may even be able to keep the earnest money deposit and sell your property to another buyer at a higher price than the original contract.

However, “legally entitled” does not mean “automatic” – far from it! In order for you to actually receive the earnest money deposit, the buyer must sign a release agreeing the funds should be turned over to you. Otherwise, you could be facing a costly and time consuming lawsuit to retrieve the earnest money.  

Suing for Damages

Even if the buyer does agree to allow the seller to retain the earnest money deposit, the seller still may wish to sue for any damages as a result of the breach. You may not only be able to recover your out of pocket expenses or carrying costs, but also the difference between the eventual sales price of the property and the price the defaulting buyer agreed to pay, should it be less. In addition, under the contract, you may be able to claim your attorney’s fees.

Exercising Seller’s Lien

In very rare instances, such as provided in some new construction and governmental contracts, if the property title has already passed to the buyer, the seller may be able to retake the property from the buyer.

Whether you are a homebuyer or a seller, an experienced real estate attorney can provide you with the peace-of-mind you deserve when conducting such a monumental transaction. 


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