Most of the time the sale of a Home goes smoothly; but what if it doesn’t? When a Buyer makes an offer and the Seller accepts, absent some unmet condition, the parties have a binding contract. It can sometimes get lost in the excitement of a home purchase that the reality is you are contracting for a major six-figure purchase/sale. What if a Buyer or Seller wants out of a binding contract?
Part IV: If No Contingencies Provide a Way Out – Then What?
If You are the Party Wanting Out
Obviously addressing these issues before you enter a contract is much easier than attempting to address it afterwards. In order to avoid litigation this issue can be resolved by inserting a “liquidated damages” provision into the contract that, in the event of breach of the contract, limits the entire amount of damages the seller can seek to the earnest money deposit. This is a good idea for a buyer concerned about such things; this provides the buyer the safety of knowing that in the event they want out of the sale prior to closing, worst case scenario, it will only cost them their deposit. Again, this provision is typically not standard and therefore must be negotiated between the parties.
If you are a buyer and want out of a binding contract and there is no such liquidated damage provision- ask the Seller for such relief – ask for, in writing, a rescission of the contract in exchange for seller keeping your earnest money deposit. Even if seller does not initially agree, it is a good starting point to negotiations. Keep in mind if you get to this point in a breakdown in the agreement you should always contact a lawyer for advice prior to negotiating.
In this series, we will be looking into the following:
- Part 1: The Real Estate Sales Agreement is a Contract
- Part 2: What About Those “Contingencies”?
- Part 3: If No Contingencies Provide a Way Out – Then What? (If you are the Party Wanting to Close on the Home)
- Part 4: If No Contingencies Provide a Way Out – Then What? (If You are the Party Wanting Out)
- Part 5: Conclusion
By Real Estate Attorney Jeshua T. Lauka.
Jeshua is an attorney at David & Wierenga, P.C., a business law firm located in downtown Grand Rapids, Michigan. Jeshua practices in business, real estate, estate and trust work and related litigation. Jeshua has developed a focus on representing corporate and individual clients in distressed/foreclosure-related real estate matters, whether it is a corporate or construction industry client renegotiating a loan, or homeowners faced with being forced out of their homes.