What happens when a buyer leaves a seller at the closing table and it is not related to unforeseeable circumstances? In Florida, the FAR/BAR contracts are the mainstream residential transactional sale agreements and they generally provide the parties with a reasonable expectation of their rights and remedies upon a buyer or seller default.
When Johnny Remorse decides not to close on 2011 Street Dream House Susie Seller must first determine if the buyer is in default of the real estate transaction. A default will depend on what version of a FAR/BAR contract that the parties have elected to use. A seller should examine the contract and the reason why the buyer is refusing to close. Does the buyer have a legitimate contingency to cancel the contract? If no default exists, there is no actionable remedy that Susie Seller may have against Johnny Remorse and he is free to walk away from the transaction.
However, if Johnny Remorse’s reason constituted a default, Susie Seller should look at Paragraph 15 of her real estate contract. There are two remedies common to the “AS IS” and the Standard Contract when a buyer’s defaults: (1) retain the earnest escrow money deposit; or (2) proceed in equity against the buyer to ask a court to force the buyer to perform the real estate transaction and purchase the property. Often, a seller will elect to keep the deposit and relist the property. Why? There is great expense and uncertainty with a specific performance lawsuit. A court may decide that the seller is not entitled to a judgment instructing the buyer to close. Each transaction must be evaluated on a case-by-case basis to determine what is in the best interests of a seller. Often, parties will elect to revive a contract when the buyer’s default was the failure to close on or before the closing date. For example, if the seller agrees to grant a buyer additional time to secure financing, a seller should negotiate the contract’s revival to not allow the buyer a second bite at the apple to cancel the sale and terminate the contract without liability!
Regardless of the contractual remedy the seller selects, a buyer and seller should examine the real estate contract and determine what steps must be addressed prior to filing a lawsuit. The FAR/BAR standard contract and the “AS IS” contract both require the parties to attempt to mediate a dispute and it is highly recommended that the parties consider this option in lieu of filing a lawsuit that may be costly and lengthy. And as always, should you have any questions or concerns during your real estate purchase, immediately contact your local real estate attorney to ensure that your interests are protected.
Sincerely,
Michael E. Schuchat, Esq., mschuchat@berlinpatten.com
Berlin Patten Ebling, PLLC
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
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