Whatare our legal rights/responsibilitiesif we back out of a real estate contract?

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Whatare our legal rights/responsibilitiesif we back out of a real estate contract?

I put an offer in on a house (with $500 down earnest) and was accepted on account that I sold my house. We put our house for sale and got 2 offers on it. My wife then found out she might lose her job so we pulled out because without her income we would not be able to afford the new house. The realtor informed me that the owners of the house we put a bid on are going to sue us for the difference they lose on their house when it sells. They are keeping the earnest money. Also the realtors, all part of the same company and work out of the same office, were telling both parties how many offers where made on the other parties houses which seems unethical and illegal. Do I have any recourse and if they do sue will they win?

Asked on August 4, 2011 Iowa

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

You need to carefully read the purchase contract that you signed to purchase the home that you are no longer able to acquire.

If there is a "liquidated damages" provision within it that is initialed by the parties stating that in the event you cannot close escrow on the property due to your own reasons where you would solely lose your $500.00 earnest money deposit, then under the agreement, you would only lose the $500.00. Hopefully this is the situation. In California, many real estate contracts have these "liquidated damages" provisions where initialed by the buyer and the seller, the deposit is the only money of the buyers at risk before close of escrow.

If you do not have an initialed and agreed upon "liquidated damages" provision in the contract that you cannot complete, the potential damages facing you for breaching it would be the difference between the contract price you have and the subsequent sales price. If the home sells for equal or more than your contract price, the sellers would have no damages.


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