When parties enter into a sale agreement in a real estate transaction, that agreement is a binding contract. It typically specifies the purchase price, describes information on the closing date, and other relevant facts about the buyer, the seller, and the property. Like other legally binding contracts, if one of the parties refuses to complete the real estate transaction according to its terms, the other party may seek damages for breach of contract.
Seller’s Breach of Contract
If the seller is the party refusing to complete the transaction, the buyer can seek “specific performance”. This is an equitable remedy in which the courts require the seller to actually go through with the sale. It is an available remedy since real estate is considered to be unique and one of a kind, so courts often grant this remedy on the basis that monetary damages are not sufficient to compensate a buyer for suffering the loss of the property.
Specific performance is not the only remedy. The courts may order the seller to pay for any money the buyer lost as a result of the failed transaction, including mortgage application fees or appraisal and inspection costs. The seller may also need to pay the buyer the cost of the difference between the accepted price on the property and the fair market value. For instance, if the property is worth $100,000 and the agreement was for the buyer to buy the property for $90,000, the seller may be required to pay the buyer this $10,000 difference.
Buyer’s Breach of Contract
If the buyer is the one unwilling to go through the transaction, normally monetary damages is the only remedy granted the seller. Courts are reluctant to require specific performance from the buyer and force this party to buy the property. The buyer will be required to pay for all actual losses, and if the fair market value is worth less than the accepted buyer’s offer, the buyer may have to pay the difference between fair market value and the offered price.