Selling a home or other piece of real estate is stressful, and knowing that you have a willing buyer who is going through the process of securing financing and inspections can be a huge relief. You have negotiated the purchase price, concessions and contingencies; and, while you expect a few hiccups along the way, you ultimately expect the buyer to show up at closing and sign on the dotted line.
Unfortunately, things do not always go as planned. Buyers occasionally back out; and, when they do, they leave sellers facing a difficult question: What do I do now?
Is the Buyer in Breach of the Purchase Agreement?
In order to understand your options after a potential buyer backs out, you first need to determine whether the buyer is in breach of your purchase agreement. In a standard residential real estate deal, the buyer will seek to negotiate one or more of several possible contingencies into the agreement (commercial real estate contracts will often be much more complex and involve a variety of different heavily negotiated contingencies).
Common contingencies in residential real estate purchase agreements include:
- Appraisal Contingency – The buyer may reserve the right to back out if the property does not appraise for the sale price.
- Financing Contingency – The buyer may reserve the right to back out if he or she is unable to secure a mortgage from a reputable lender.
- Inspection Contingencies – The buyer may reserve the right to back out if an inspection reveals a substantial issue with the property.
- Sale Contingency – The buyer may reserve the right to back out if he or she is unable to sell a current residence.
If a buyer backs out based on a contingency – and does so within the time limit and other conditions prescribed – the seller may have little choice but to put the property back on the market. However, depending upon the circumstances, it may be possible for the parties to renegotiate their deal as well. For example, if a buyer attempts to back out citing a bad inspection report, it may be in both parties’ best interests to negotiate additional concessions that still allow the deal to go through.
What to Do If the Buyer Is in Breach
When a buyer is in breach (i.e. if the buyer attempts to back out without relying on a valid contingency), the seller will typically have a couple of options. One option is to relist the property. If your potential buyer paid an earnest money deposit (EMD), you should be entitled to keep it; and, if market conditions are favorable, you may be able to find a new buyer without too much trouble.
Another option is to take legal action against the buyer. While you may not be able to compel the buyer to move forward with the purchase as a matter of Dominican law, (i) you may be able to secure additional damages (beyond the EMD) for the financial losses you sustain as a result of the lost sale, and (ii) initiating litigation may convince the buyer to rethink their decision, rather than spending the time and money to defend a breach in court.
Consult a Real Estate Lawyer at The Del Carpio Office in Santo Domingo, Dominican Republic
Regardless of the circumstances, it is important to refrain from action until you consult an experienced attorney. With offices in Santo Domingo, The Del Carpio Office represents citizens and foreign nationals in real estate matters throughout the Dominican Republic. To schedule an appointment with one of our lawyers request an appointment online today.