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


Today I’m discussing a topic we hear questions about often: What can buyers and sellers do when the other party does not fulfill their responsibilities and defaults on the contract? What options do your clients have? 

You may have experienced this before, but as an example, let’s say you’re representing a buyer; so far in the transaction, the repairs and option period have been negotiated, the repair amendment has been signed, but now the seller decides to dig in their feet and refuse to make the repairs. Or, conversely, perhaps the buyer has gotten cold feet and refuses to close. 

“The next time your client is wronged, simply direct them to paragraph 15.”

Fortunately, their options are spelled out in the contract. Paragraph 15 of the One to Four Family Residential Contract specifies two remedies for the non-defaulting party. The first is to sue for specific performance; the seller can make the buyer buy, or the buyer can make the seller sell. However, you’ll have to go to court to make that happen, which can be expensive, with no guarantee of success. 

The second option is for both parties to sign an earnest money release form, releasing the earnest money to the non-defaulting party. With those signatures, all parties are releasing all other parties from claims made under the contract. This is usually how these conflicts are settled. It doesn’t always completely delight the innocent party, but it’s generally the best option for everyone. 

The next time your client is wronged, simply direct them to Paragraph 15 in their contract. 

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