Legal Question in Real Estate Law in California

Re: Buyer backed out of home purchase after loan documents ready

Buyer should instruct escrow to release the funds.

You may have a lawsuit for damages or specific performance (forcing sale).

Joel Selik

Attorney & CA Licensed Real Estate Broker

800-894-2889

Re: Buyer backed out of home purchase after loan documents ready

Sellers are rarely successful in specific performance cases, while buyers are often successful in such cases. Why? Because there are hundreds of buyers out there who could buy your property, but there is only one "specific" property like yours. You would be barking up the wrong tree with a specific performance action.

On most real estate contracts, there is a clause called "liquidated damages." Without getting into finite details, it mainly means that if the buyer does not perform, your damages are limited to the amount of the deposit, or 3% of the purchase price, whichever is less. The fact that you can document other damages might be irrelevant.

If you have written removal of contingencies (if the contract called for activer removal) or the time to bring up the contingencies has passed (passive removal), then you would most likely prevail in a case for the recovery of the deposit. Small claims, of course, is only good up to $5000. If the deposit is greater than that, you would need to go to Superior Court. You would need to do this, not your agent.

Finally, if and when the funds are released, the contract will normally dictate how liquidated damages funds are distributed. Often, they call for anyone who had done any inspections to be paid from those funds. You need to check your contract.

You will also want to remember that, if you are still thinking of selling your house, you may not be able to sell it until the matter is settled, because you would be required to disclose that there is litigation regarding the property, and the buyer could file a lis pendance on the property.

Re: Buyer backed out of home purchase after loan documents ready

You may have a choice, you can bring an action against her for specific performance or seek damages which may include an amount more than the deposit. Some contracts require mediation or arbitration. Every contract depends on its terms. If you fax the contract to me at 714 714 363 0229, I will provide you with free consultation.