Seller Default on a Residential Transaction

While it may not happen often, we have recently experienced an increase in the number of sellers attempting to “walk” from the transaction.  In this instance, the buyer is often left in a difficult position and wondering what remedies they may have against the seller, if any.  Fortunately, the answer is set-forth in most contracts and it is certainly set-forth in both the “Standard” and “AS-IS” FAR-BAR contracts, which are the contract forms used most often in Southwest Florida.  These contracts outline what remedies a buyer may have in the event of a default by the seller.

So when is a seller determined to be in default under the contract?  The most obvious answer is when a seller simply refuses to sign the closing documents or flat out tells the buyer that they (the sellers) are canceling the transaction.  What many people don’t realize is that a seller is considered to be in default if the seller “fails, neglects, or refuses to perform seller’s obligations under the contract…”  Examples of a seller default include: (1) not allowing access to the Property for inspections; (2) not providing disclosure documents to the buyer as required by Florida law; and (3) refusing to execute the closing documents at closing.

Now that we have determined that the seller is in default, what can a buyer do?  The buyer has a few options once it is determined that the seller is in default.  The most common remedy is for the buyer to request the return of their deposit and walk away from the transaction.  While this is certainly the path of the least resistance, it is not always an adequate remedy for a buyer who has spent a great deal of time and money prior to the seller default.  At this point, the buyer may consider pursuing litigation.  Pursuant to the terms of the contract, the buyer may elect to receive a return of the buyer’s deposit without thereby waiving any action for damages resulting from the seller’s breach, may seek to recover damages, and/or seek specific performance.  In pursuing a damages and/or specific performance suit against a seller it is important to have a well-documented history of the file, as these cases often come down to questions of fact.  An experienced real estate attorney can assist you in preparing and documenting the file throughout the transaction, which is yet another reason to engage a real estate attorney early on in the closing process.

It is important to note that seeking damages and/or specific performance can be very costly remedies for a buyer upfront. However, it is also important to note that most contracts (including the FAR-BAR contracts) contain a prevailing party attorney fees provision, which means that the non-prevailing party will be responsible for paying the prevailing parties’ costs, fees and reasonable attorney fees.  While litigation is never an appealing option, there are times when the parties to a transaction are left with no other alternative.  In those cases, it is imperative to seek the guidance of qualified legal counsel.

As always, we recommend that you seek the counsel of an experienced real estate professional when dealing with a potential default of a residential transaction.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by William McComb, Esq. wmccomb@berlinpatten.com

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.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged. 

www.berlinpatten.com 

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