Real Estate Contracts 101: Breach by Seller

Residential real estate transactions typically involve the signing of a contract between a prospective buyer and owner. In most cases, both parties follow through with their contractual commitments. However, sellers of real estate sometimes attempt to cancel the contract—a situation that forces the buyer to either accept the default or initiate legal action. Below is an overview of things to consider when a seller breaches a real estate contract.

Contract contingencies

Prior to initiating legal action due to a breach, both parties to a real estate transaction should remain aware that legal methods of terminating the transaction, called contingencies, are included in most real estate contracts. Common contingencies include:

  • Kick-out clause – A kick-out clause permits a seller to accept a higher purchase offer than the one made by the current buyer. Kick-out clauses are typically confined to a specified time period.
  • Financing – Most real estate contracts contain terms that permit buyers to terminate if financing cannot be obtained. If a buyer can’t obtain financing, then both the seller and buyer have the option of canceling the agreement.
  • Home inspection – Buyers are permitted to conduct damage inspections prior to completing real estate transactions. If the unreported damage is found to a subject property, then the buyer is not required to complete the transaction.
  • Appraisal – A buyer isn’t required to complete a real estate transaction when a property’s appraisal value is lower than its asking price.
  • Clear title – Most contracts require sellers to provide buyers with clear title upon closing. Title problems allow buyers to terminate real estate transactions without facing legal recourse.

Remedies for Seller Breach

Once it has been determined that a breach of contract was not based on the failure to meet a contractual contingency, buyers have several options that they may pursue, including:

  • Specific performance – When a seller is unwilling to turn over a piece of property that has been legally purchased, the buyer may be entitled to bring an action for specific performance. When granted, specific performance forces sellers to convey purchased properties to buyers. However, courts are generally reluctant to force homeowners to sell their properties, so specific performance is an uncommon result.
  • Monetary damages – If a buyer suffers financial damage due to a seller’s breach, then the purchaser is entitled to file an action in civil court for monetary damages.
  • Contract termination – In the event of a breach by the seller, the buyer is sometimes permitted to terminate the contract. When both parties agree to terminate a purchase agreement, the buyer can typically recover any purchase money paid.

Rhode Island Real Estate Attorney

Whether you wish to draft, enforce, terminate, or review a real estate contract, please consider contacting the Law Offices of Richard Palumbo to discuss your situation. Our experienced real estate attorneys will keep you apprised of your contractual rights and duties while guiding you toward the best course of action based on your unique circumstances. At the Law Of