Breaking a real estate contract

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Breaking a real estate contract

Hi there,
I was wondering about breaking a real estate
contract, due to an inability to to get
mortgages. But, during this time the market
price of the house had dropped a bit, and the
seller is reluctant to agree to a mutual release.
Even if we forfeit our 70,000 deposits check.
And suggested that if we do not close, they are
going to sue us. I wanted to know what is the
best thing to do in this situation?

Thank you so much

Asked on June 23, 2018 under Real Estate Law, Alaska

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

If you break the contract for any reason, including an inability to get a mortgage or if the market value declines, the seller will be entitled to keep your deposit. That is, after all the purpose of the deposit: to guaranty the seller some compensation, so they will take the house off the market and sell to you; to incentivize or encourage you to go through with the purchase, by putting your money at risk. Typically, however, the deposit is ALL they can get (in fact, many contacts of sale specifically say that in the event of the buyer's breach, the seller's recourse is only to the deposit; if the contract limits the seller to keep the deposit, that's all they can do), unless they can show that in THIS case they incurred some losses or "damages" exceeding the deposit and which are traceable to your breach, something that is often not easy to do.


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