In times of market uncertainty, both buyers and sellers may encounter unforeseen challenges that can result in decreased home values or even deal-breakers. Buyers, dealing with the personal impacts of economic volatility, may find themselves needing to break agreements more frequently. Simultaneously, sellers might need to adjust their heightened expectations of 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 bear in mind when facing challenges in any real estate transaction:
- Consequences if Buyers Cannot Close: If a buyer fails to close, and their agreed-upon sale price was $800,000, the seller will relist the home. If the subsequent sale is for $750,000, the seller can sue the buyer for the full $50,000 loss, along with interest and legal fees.
- Disposition of the Buyer’s Deposit: The buyer’s deposit remains in the listing brokerage’s trust account, and the seller must sue to recover it. Even if the seller sells for the same price or more, without incurring a loss, they can still sue and retain the buyer’s deposit.
- Buyer Changing Mind About Deposit Payment: If a buyer signs an Agreement of Purchase and Sale but later decides not to pay the deposit, the outcome is the same for the buyer. The seller can sue for any loss on the resale and also for the unpaid deposit.
- Collecting Owed Amounts After Winning Lawsuit: Collecting what is owed after winning a lawsuit against the buyer is uncertain. Every buyer 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.
- Negotiating an Extension of the Closing Date: An extension is generally a beneficial solution for both parties. Buyers gain more time for financing or selling their current home, while sellers can negotiate extension 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.