If a party defaults on the contract, you have two main options.


Today I’m addressing a question I hear from real estate agents regularly: What can you do when the cooperating party in a transaction defaults on the contract? What options does your client have? 

We’ve likely all been there: We’re representing a buyer, we’ve negotiated repairs, but now the seller digs in their feet and refuses to make the improvements. Or maybe you’re representing the seller, all is going well, they’ve fulfilled all their responsibilities under the contract, but the buyer gets cold feet and refuses to close.

“The next time your buyer or seller client is wronged, don’t panic.”

Fortunately, the options for your clients are right there in the contract. You don’t have to guess or hire an attorney. If you look in paragraph 15 of the One to Four Family Contract, it specifies the solutions for the non-defaulting party. There are two main courses of action:

  1. The defaulting party can be sued. One party can force the other to do what the contract says, though doing this requires going to court and involves all associated fees. It’s expensive and there’s no guarantee of success. 
  2. Earnest Money Release Form. Both parties can sign this form, granting the earnest money to the non-defaulting party. With those signatures, all parties are releasing all other parties from any claims under the contract. This is frequently how these disputes are settled. This doesn’t always fully delight the innocent party, but given the options, this is usually the best choice. 

So the next time your buyer or seller client is wronged, don’t panic. Simply direct them to the contract they signed, and it clearly spells out their options. 

If I can ever help you with contract issues, client problems, or anything else, please give me a call or send an email. I’m here to help. Let’s get there together.