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What happens after someone violates a real estate contract?

Real estate transactions often have many details and moving parts to track. It can be difficult for sellers, buyers and their professional representatives to remember all the details about a property or the terms of an offer.

Contracts are crucial in real estate because they make agreements enforceable and verifiable. When a buyer makes an offer, they will typically draft an offer that eventually turns into the purchase contract for the property.

Unfortunately, even when a buyer and a seller agree on a sale, one of those parties could breach the contract. What happens if that occurs?

When the buyer breaches the contract

Part of making an offer is depositing earnest money. Buyers will often give a percentage of the asking price to the seller for deposit as a sign that they are sincere about their offer. If the buyer backs out of the transaction and breaches the original agreement, the seller will usually get to keep the earnest money to compensate them for the frustrations and delay inherent in relisting the property.

Sometimes, buyers limit their offer by adding conditions to the sale. They may need to sell their own home before closing or demand that the appraisal aligns with the offer they’ve made on the property. If a buyer doesn’t complete the purchase in a way covered by a contingency, they do not breach the contract and therefore do not incur any penalties.

When the seller breaches the contract

There are multiple ways in which a seller could violate the terms of the purchase agreement they set with a buyer. For example, a seller could cause damage to the property before they leave or might retain items that the buyer expects to pass with the property, like appliances. Other times, the seller might choose not to vacate the property at the appropriate time.

When a seller breaches the real estate contract, there may be multiple different ways to handle the issue. A buyer might need to take a seller to court for damages. They might also need to have the courts enforce the agreement or render it null and void, allowing the buyer to reclaim their earnest money and any other funds deposited.

Understanding the nature of the breach and the contract that applies to your situation can help you pursue the right resolution to a legal issue involving a real estate contract.