By Vanessa Saunders – Founder & CEO – Global Property Systems
When Real Estate Takes An Unexpected Turn
Years ago, in my adventures through the real estate world, I encountered an incident that exemplified the unpredictability and complexity of this field. A property in Piermont, steeped in history and charm, became the center of a dramatic tale of longing, heritage, and the intricacies of real estate contracts.
The house was under contract, with sellers and buyers excitedly preparing for their next chapters. Then, out of the blue, I received a call from California. “That house you’ve listed in Piermont? That was my great-grandmother’s. I have to buy it.”
Taken aback, I replied, “Sir, the property is already under contract, and we’re close to closing.”
Undeterred, he responded, “I’m an attorney and aware of my rights. You’re obligated to present all offers, aren’t you?”
He was right. And not just that, he was ready to make it worthwhile for all parties involved, offering a significant amount over the accepted price and covering all related expenses. His determination prevailed, but it came at a hefty price.
However, the real estate world is fraught with complications. Breaches happen due to a lack of understanding and instruction by all parties involved, be it the loan officer, attorney, or buyer’s agent.
Contracts: Binding, But Not Unbreakable
So, we think a contract signed by all parties is binding, right? Not necessarily. While a signed contract reflects a mutual agreement and intention, it isn’t an absolute guarantee of performance. Mechanisms within the legal framework allow for a contract to be broken, but it often comes at a significant cost, whether financial, reputational, or both.
In the world of real estate, contracts signify commitment. But as with many aspects of life, unforeseen circumstances, changes in decision, or even mere whims can lead parties to consider breaking the contract. It’s crucial to understand that such decisions are not without consequences.
Breach of Contract in Real Estate: The Basics
When a real estate contract is signed and subsequently broken, it’s termed as a “breach of contract.” Here are some typical situations:
1. A seller agrees to sell their property but later refuses.
2. A buyer commits to a purchase but fails to provide the agreed funds.
In the event of non-performance, the implications can be significant:
1. Loss of Earnest Money Deposit: Typically, a non-performing buyer might forfeit their deposit, demonstrating their intent to purchase.
2. Lawsuit for Damages: The aggrieved party may seek legal remedies.
3. Specific Performance: Courts might order the breaching party to fulfill their obligations.
4. Cancellation of Contract: The contract may be voided without penalty.
5. Mediation or Arbitration: Disputes might be resolved outside the court.
6. Relisting or Seeking Other Buyers: Sellers may look for other interested parties.
7. Contract Extensions or Modifications: Adjustments can be made if both parties agree.
8. Liquidated Damages: A predetermined amount might be paid in case of a breach.
A Cautionary Tale:
While preparedness is key, sometimes events unfold that catch everyone off guard. Take this incident: All set for closing on Friday, excitement in the air, and arrangements in place. But then, during the walk-through, the buyer’s agent receives a game-changing call. In their enthusiasm, the buyers made a significant purchase that altered their financial profile. Suddenly, the bank retracts its mortgage approval, jeopardizing dreams and deals alike.
Conclusion: Real Estate’s Unpredictable Tune
As the saying goes in real estate, “It’s not over until the fat lady sings.” And, while she might have lost some weight recently (much like myself!), the core message remains. Transactions can be unpredictable and filled with twists and turns. So always be ready for the unexpected. And if singing is what it takes to finalize a real estate deal, perhaps I should consider vocal lessons!