When one party fails to fulfill their contractual duties in a real estate contract, it can lead to serious legal and financial consequences. The consequences of these breaches can lead to delays or lost financial opportunities. Whether you are a buyer or a seller, understanding the implications of a breached contract helps in mitigating the risks associated with real estate transactions.
In such complex situations, consulting with a real estate attorney is essential. At Savage, Royall & Sheheen, LLP, we’ve helped countless buyers and sellers tackle real estate contract disputes. If you’re facing a breach of contract issue, our experienced real estate attorneys are here to provide the guidance and legal representation you need.
What Is a Breach of Contract in Real Estate?
A breach of contract happens whenever one party—buyer or seller—fails to live up to their part of the deal as outlined in the legally binding agreement. This contract, typically called a purchase and sale agreement, is legally binding and outlines each party’s responsibilities, including the price, closing date, contingencies (like inspections or financing), and any other negotiated terms.
When one side doesn’t hold up their end of the bargain, it’s considered a breach. A breach can impact both parties, leading to lost financial opportunities, additional expenses, and legal complexities.
It disrupts the expected and agreed-upon exchange between the buyer and seller, undermining the trust and security that contracts are meant to provide in real estate transactions.
Common Reasons Sellers Breach Contracts in Real Estate Deals
A seller breach of contract occurs when the seller:
- Refuses to sell
- Decides to sell to another buyer
- Fails to make agreed-upon repairs before closing
- Fails to disclose defects with the property
- Doesn’t move out before the agreed-upon date
This can have multiple consequences for the buyer. First and foremost, it means the contract they signed for the home they set their heart on is canceled, putting their house purchase in jeopardy. If this happens, the buyer will get their deposit back and may be able to sue for financial losses. In some instances, the court may order the seller to complete the sale.
Common Reasons Buyers Breach Contracts in Real Estate Deals
Just as sellers can breach, buyers can also fail to meet contractual obligations. Common reasons behind a breach of real estate contract by buyers include:
Financing Falls Through
Even pre-approved buyers can face sudden issues with lenders, such as losing their jobs or experiencing changes in their credit scores, causing the loan approval to fall apart at the last minute.
Cold Feet (Buyer’s Remorse)
After signing the contract, buyers start second-guessing their decision—maybe they realize the house isn’t the right fit, or they worry they’re overpaying in a shifting market. In these cases, buyers might back out without a solid contractual reason, leading to a breach.
Property Condition and Inspection Issues
Buyers sometimes walk away if inspections reveal unexpected, costly problems that cannot be satisfactorily resolved. While contracts typically allow buyers to negotiate or request repairs, unresolved disagreements can lead buyers to abandon the deal.
Failure to Meet Contract Deadlines
Real estate contracts contain strict timelines for deposits, inspections, mortgage approvals, and closing. Missing these critical deadlines can put a buyer into breach, especially if they fail to communicate or negotiate extensions.
Finding a Better Opportunity
Though ethically questionable and legally risky, some buyers breach contracts if they find another property that suits their needs better or is available at a more attractive price.
Steps to Take When Facing a Breach of Contract in Real Estate Transactions
When faced with a breach of contract in a real estate transaction, the first step is to carefully review your contract documents. Take your time to understand precisely what was agreed upon, paying special attention to the specific clauses and deadlines outlined in the agreement.
Once you’re clear on the contract details, document everything thoroughly. Gather any relevant communications, such as emails, text messages, letters, and even notes from phone conversations.
Next, send a written notice highlighting the breach and requesting immediate action to rectify the situation. Clearly state what you believe constitutes the breach, refer specifically to relevant contract sections, and indicate how you expect the other party to remedy the situation within a reasonable timeframe.
If informal communication fails to resolve the issue, contact an experienced real estate attorney. A real estate attorney can help you in multiple ways, which we explain next.
How a Real Estate Lawyer Can Help
A real estate attorney helps you understand your rights under the contract. These agreements are full of legal language that can be confusing, but an attorney can break it down, ensuring you know exactly where you stand.
A lawyer can clarify whether the breach is material (significant enough to impact the deal) or minor (something that can be resolved without canceling the contract) and the remedies available.
If the other party has breached the contract, your attorney will help you explore your legal options. Depending on the situation, they may attempt to negotiate a resolution that avoids costly litigation—such as seeking financial compensation, adjusting contract terms, or finding a middle ground that keeps the deal intact. If negotiations fail, they’ll help you file a lawsuit for specific performance or seek financial damages for any losses you’ve suffered.
Contact Our Real Estate Transactions Attorneys
If you are involved in a real estate transaction that has gone sideways due to a contract breach, our team at Savage, Royall & Sheheen, LLP is ready to support you. Our attorneys understand the intricacies of real estate law and have helped countless clients successfully navigate contract disputes.
Contact us at 803-432-4391 to request a consultation, discuss your situation, and explore your legal options.