Once a real estate contract is signed, everyone hopes the deal will end with a buyer getting the keys to their beautiful new home and the seller walking away with a profitable check. Occasionally, however, a deal falls apart after the contract is signed. Maybe the buyer’s financing doesn’t come through, or the appraisal comes in lower than the contract price. Or a cloud on the title pops up (indicating that the seller doesn’t have clear rights to the property) that can’t be quickly repaired. Sometimes, either the buyer or the seller simply gets cold feet and wants out.
Since a contract is a legal document binding both parties, dealing with the fallout of these situations can be challenging. This is when a lawyer familiar with real estate laws and real estate contracts in South Florida can be important to ensuring that your rights are preserved and that you get what you are legally due.
If you are the seller, and a buyer won’t (or can’t) close:
- Sometimes a lawyer with good negotiating skills can bring a buyer back to the deal with a combination of sticks and carrots. Sticks include the realization that they can lose their deposit or perhaps be sued for damages; carrots might include such financial inducements as having some closing costs paid for, or having the seller leave some of the upgraded fixtures they originally planned on taking.
- Many contracts give the buyer legitimate reasons they can back out of a deal in a specified time period, such as receiving a poor inspection report during the allotted time, or, in some cases, not getting financing. If the buyer is exercising these options, there is not a lot the seller can do except return the escrow deposit and move on to another buyer. However, if the buyer walks away for reasons beyond those the contract allows, the seller may be entitled to the money in escrow. The escrow agent usually can’t just write you a check, though. Depending on the contract, the dispute will have to be resolved either by mediation, arbitration, court, or in some instances the Florida Real Estate Commission (FREC).
- If the contract provides for it, the seller may be able to sue the buyer for “specific performance”—that is, to force the buyer to purchase the home. Or, contract providing, you might be able to sue for money damages, such as the difference between the contracted price and the value of the property at the time the buyer breaches. Because litigation can be time-consuming and expensive, though, the reality is it is often easier to put the home back on the market and quickly move on to finding another buyer.
If you are the buyer, and the seller won’t (or can’t) close:
- Work with your Realtor and your attorney to see if there is a course of action beyond a simple, on-time closing that might solve the problem. This might include getting a contract extension (to give the seller time to clear up title, say), closing the sale in escrow (where the proceeds stay with the closing agent/attorney and are not disbursed to the seller until the issues are satisfied), having the closing agent hold back a portion of the money (enough to cover the resolution of the problem), or amending the contract to satisfy the parties and enable the close.
- Allow the contract to collapse and, if the seller agrees, have the deposit returned to you. Although you won’t get the property, you’ll be able to quickly move on to finding another wonderful home.
- Sue in state court for “specific performance,” that is, to require the seller to honor the contract. Although you may win in the end, buyers must think long and hard before pursuing this route, as court cases are time-consuming and expensive. In addition to performance, a lawsuit can sometimes also ask for damages, such as moving and storage costs during the delay, rental property costs, higher interest rates you incurred if rates went up, and the like.
The possibility that problems like this may arise is one reason I strongly urge both parties in a real estate deal to retain a lawyer throughout the process. A qualified real estate attorney can try to keep a deal together if it is in danger of being killed. If the deal does collapse, the lawyer can help you decide the appropriate actions for you. For more information about real estate deals in South Florida, contact the Law Office of Gary M. Landau by email or call 954-979-6566. Attorney Gary Landau personally returns all calls to him.