It’s springtime, so that means home listings and sales are trending up. Selling your first home is just as stressful as buying your first home — often more so because you are moving to a new home and maybe using sale proceeds to finance a new home. When the time to close arrives, the buyer in a residential real estate transaction may not be willing or able to fully perform under the sale contract. Myriad complications can arise at the final hour. Financing falls through, the sale of an existing home needed to finance the current sale may not close, or other contract contingencies may have been overlooked and since expired — just to name a few.
As agents and brokers will corroborate, this remains a seller’s market. As such, the residential seller typically has the leverage to demand a solution they find palatable.
Here are some practical tips for sellers and their agents when buyers back out at the last minute:
- Although you could file a lawsuit seeking specific performance (to force the buyer to close), Missouri and Illinois courts (in practice) are hesitant to compel buyers to specifically perform a residential sale contract when they do not have the money to close.
- Actions for money damages remain, allowing sellers to seek the difference between the instant sale price and the eventual sale price after the home is placed back on the market. As such, total the expenses incurred for inspection repairs and attorneys’ fees, and request those amounts in addition to the earnest money on deposit.
- If all contract contingencies have expired, add a premium on top of that expense figure. Buyers have and will pay it to secure a release from a contract. The premium can be described as “cost of carry” in any consideration recital in the release. Buyers unable to close want to be released from the contract, but also want a full release before moving on.
- If any contingencies remain, strategically remove those that are obstacles to close. Or revisit other deal terms written into the form contract that are unique to the transaction.
- Make the return of any earnest money contingent on the buyer finding a replacement buyer, and assign a deadline to do so.
- If the sale of an existing home is the problem, contemplate a short extension of closing — but ask for more earnest money for added security.
- Regardless of how you proceed, work closely with the closing agent title company. They hold the earnest money until a release is signed.
- Claims on title insurance policies are likely not assignable; avoid that trap if offered.
- Agents and brokers are highly skilled at outlining and executing closing alternatives. However, seriously consider retaining counsel to workshop ideas (often a brief consultation is all you need) and include those costs into the “premium” mentioned above.
