Breach of Real Estate Contract as a Buyer


What happens when you get your offer accepted as a buyer in real estate and walk away? Its called a breach of contract.

I just met up with a first time home buyer the other day, and they were writing an offer on a home.  They asked what would happen if they ended up walking away from the deal that ends up getting accepted.  In this video, I will discuss the 3 likely results, if you breach a real estate contract as a buyer.  

  1. The Deposit - when you write an offer in real estate most likely you would have put up a deposit in good faith to secure the contract for the home.  The deposit on a real estate contract is usually 5% of the purchase price.  This contract when agreed upon is firm and the deposits are non refundable.  Some times as a buyer things happen, maybe your mortgage fell thru before completion, or you just lost your job.  Another situation is that the market shifts in an extreme negative direction, and you would rather walk away from the deal than to complete it.  If you breach your real estate contract you would first lose your deposit.    
  2. Lawyer Fees - all real estate contracts involve a seller and a buyer.  If you walk away with any contract there will be penalties.  In most cases the seller will take you to court and you will end up spending money toward lawyer fees.  Remember, Lawyers are not cheap, at about $500 per hour.
  3. Equity loss -  the real estate market is up and down, once you have an offer accepted the seller puts the home on hold for you to complete the transaction.   Over this time period, the market could have shifted from a really good market for the seller to a really bad market for the seller.   An example could be a home that sold for $1.5 MILLION during a good market, but the same home is only worth $1.3 million during a bad market.  The seller can end up suing the buyer for that $200,000 difference.  

So the total penalties that can occur if you are unfaithful to your real estate contract is the loss of your deposit, the lawyer fees, and the total equity loss.

Question of the day, would you walk away from a real estate contract?  Please leave it in the comments below. I will try my best to personally answer all comments myself.     

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