Breach of Contract Issues in Real Estate Contracts
Real Estate contracts are traditional contracts that set out the details as well as the rights and responsibilities of all parties involved. The contract in essence is a promise between the buyer and the seller. The buyer makes a legal promise to purchase the home at the agreed upon price and the seller promises to furnish the property in the agreed upon condition. Real estate contracts sometimes have contingencies attached to them, thus making the closing of the transaction contingent on certain occurrences. Both buyers and sellers can place contingency clauses into the contract. Importantly, the real estate contract should not be confused with the real estate closing itself. The signing of a real estate contract does not mean the house has transferred. Various steps must occur before the transaction is finalized. Within the interim, both the buyer and seller must uphold certain promises per the real estate contract. Failure to do so results in a breach of the real estate contract.
The buyer of the property in a real estate contract must uphold a number of promises that stems from the agreement. These promises include providing an earnest money deposit in consideration of the real estate contract, securing all necessary financing, and providing all final cash payments at closing. At any point during the process, when a buyer does not abide by the real estate contract, s/he is a considered to be in breach. The buyer is required to provide an earnest money deposit at the time the real estate contract is signed to show a good faith intention of going through with the transaction. If the deposit is not made, the contract is not valid. After the contract is signed, the buyer must obtain financing from a lender. If the buyer should fail to engage a lender and go through the financing process, they are in material breach of the contract. Depending on the severity of the breach, the earnest money deposit may be paid to the seller as damages for any harm. If the buyer gets as far as the closing and does not have the remaining funds due, they are putting their earnest money deposit at risk of forfeiture.
New York subscribes to the doctrine of caveat emptor (“let the buyer beware”) when it comes to real estate transactions. Caveat emptor is a legal doctrine that places the onus on the buyer to thoroughly vet a piece of property before making a purchase. As such, the seller of real estate in New York is subject to few obligations. All the same, the real estate contract does make demands of the seller to meet certain standards. For instance, all sellers are to engage in good faith dealings during the transactions. This means the seller’s dealings are to be free from dishonesty and omissions. Sellers are also required to abide by contract contingencies. This means that if a contingency is not met the seller should, in good faith, release the buyer from any liability to complete the transaction.
Contact Us for Legal Assistance
It is important to involve an attorney when signing a real estate contract. To learn more about purchasing a home and all the complexities involved, contact an experienced real estate attorney at Meyer & Spencer, PC. We serve individuals and families in Pleasantville, Westchester, Mahopac and Putnam Counties.