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Understanding breach of contract in real estate

On Behalf of | Nov 16, 2020 | Real Estate |

Buying or selling a home requires numerous steps and contingencies. When a buyer makes an offer and the seller accepts, there is a real estate contract in place.

This contract is legally binding, and if either party does not fulfill the contract’s obligations, this is a breach of contract. There are specific valid reasons in which one party can back out of the deal without consequences, but otherwise there is some type of financial ramification for the one breaking the contract.

Valid reasons to back out of sale

According to, there are five circumstances in which a home sale does not go through and neither party is legally liable. These reasons include:

  • One or both parties have not signed the contract yet
  • Seller put an addendum in the contract that allows for backing out without penalty
  • The buyer is unable to secure adequate financing
  • The seller refuses to make repairs requested by the buyer
  • The contract is in a five-day review period

Breach of contract consequences

Once the buyer has the funds for the mortgage and it is after the contract review period, there are consequences if one party wants out of the deal. According to U.S. News and World Report, if the seller backs out too late, the buyer has the option to sue. The lawsuit may try to regain money spent on temporary housing and storing costs as well as costs relating to the home inspection and survey. If a buyer breaks the terms of the contract, oftentimes the consequence is forfeiting all or part of the deposit.


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