Legal Question in Real Estate Law in Tennessee
Buyer backing out of contract day before closing
Buyer had signed contract with seller to purchase property, the buyer backed out on day before closing. There were no contingencies in the contract. The seller from above had signed contract with another party to buy a different property and now can't purchase due to can't have two homes. What rights does the seller have to have the buyer who backed out pay the fees that have came up with the loan that they now can not use and other fees such as appraisal, home inspection etc?
1 Answer from Attorneys
Re: Buyer backing out of contract day before closing
Usually real estate contracts call for the buyer to put down earnest money on a house to show he is serious. Did your buyer put down earnest money? If so, what happened to that money? Under these circumstances it would be fair for the seller to keep the earnest money to offset his losses on securing the loan, etc. However, if the contract called for the earnest money to be returned to the buyer, then you would have to follow the terms of the contract. When you said the contract contained no contingencies, then it sounds like it did not cover earnest money either.
The lesson to be learned from this in no unique to real estate contracts. Any time you sign any type of business contract, you need to consider the worst case scenario and ask how the parties have an exit strategy to dissolve the contract without causing harm to either party.
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