Legal Question in Real Estate Law in California

You need to look at your original purchase agreement. If the liquidated damages provision is checked, your damages cannot be higher or lower than the amount specified (3% of the purchase, if I remember the form correctly). If not, then you are entitled to your out of pocket losses and expenses. You are also theoretically entitled to the difference in value between what you agreed to pay for the property and what it was worth, but of course the definition of market value is what a willing buyer and seller will agree to. So unless something has happened between signing the agreement and now that greatly increased the value of the property, or for some other reason you got the seller to agree to a price much lower than the property is worth (e.g., you know GyNormous Corp. is about to pay any price for the right to mine the new miracle metal Unobtainium on the property and the seller doesn't), those damages will basically be zero.

I come to a different conclusion. The statutory 3% maximum liquidated damages law (Civil Code section 1675) applies to retention of the buyer's deposit if the buyer defaults. Here, we seem to have a defaulting seller. CC 1675 does not apply. Here's my opinion:

A buyer is almost always entitled to specific performance, a seller rarely. You can sue to enforce the contract of sale if the seller defaults. The time of default will depend upon whether the contract has a "time of the essence" provision. If it does, and if the closing date has come and gone, and there are no more conditions you needed to fulfill, you have both the right to commence an action for specific performance AND you are the equitable owner...the seller retains "bare" legal title as collateral for the payment of the full purchase price, and you hold equitable title as collateral for delivery of legal title.

In addition to the right to sue to compel the seller to close, you are entitled to an accounting and for money damages as determined by such an accounting. We aren't told if this is income property or property you intend to use yourself, and the accounting principles that would be used to determine your damages are somewhat different. With income property, the measure would be net lost income, and with a residence it would be the fair rental value of the sold property, less interest the buyer has avoided. Sometimes buyers think they are entitled to costs such as additional storage and alternative living-space rental and so forth, but these are (from what I've just read) not proper elements of your damages.

It is important to look at the purchase agreement to see whether the parties have elected arbitration of disputes, prior mediation, etc. If so, these procedures need to be followed, but the result is likely to be the same. Arbitrators can require specific performance. You should also review your agreement for any provision that seems to alter your rights in the event of the seller's default, and for an attorney-fee recovery provision, any or all of which may affect your tactical choices.