Real Estate Contracts: Seller and Buyer Defaults

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Questions and Answers

What is one remedy available to a home seller if a buyer fails to fulfill their contractual obligations?

Increase the price of the home

Reduce the deposit amount

Forfeit the buyer's earnest money (correct)

Automatically extend the contract

Under what condition are courts likely to enforce specific performance in a home sale contract?

If the buyer agrees to negotiate a lower price

If the seller can demonstrate financial hardship

If the buyer has the financial capacity to complete the purchase (correct)

If the earnest money exceeds a certain amount

What is a possible consequence for the seller if the buyer attacks the contract's terms?

The seller is required to lower the sale price

The seller can sue for criminal penalties

The seller may have to negotiate a refund of earnest money

The seller can terminate the contract and return the deposit (correct)

What limitation exists for sellers seeking damages beyond earnest money if a buyer defaults?

It's difficult to recover more than earnest money due to buyer's financial situations Signup and view all the answers

If there's a dispute concerning the earnest money, what is the recommended course of action?

Hold the funds until the situation is resolved at the Circuit Court Signup and view all the answers

What consequence can a buyer face if a seller wrongfully fails to perform their obligations under a contract?

Money damages for breach of contract Signup and view all the answers

Which of the following is a situation where the seller can cancel a sale without penalty?

The seller cannot find another house to buy despite good-faith efforts. Signup and view all the answers

What happens if both the buyer and seller agree to terminate the agreement?

The buyer recovers any purchase money paid. Signup and view all the answers

What must happen before earnest money can be distributed?

The buyer and seller must both agree. Signup and view all the answers

Which statement is accurate regarding contracts that may be considered unenforceable?

A seller can cancel a contract if it is unenforceable without repercussion. Signup and view all the answers

What is a common reason a seller might be legally allowed to back out of a sale?

The seller experienced unexpected family changes warranting withdrawal from the sale. Signup and view all the answers

What should a buyer do if there is a disagreement regarding the disposition of earnest money?

Deposit the funds with the Circuit Court. Signup and view all the answers

Why are courts generally reluctant to enforce specific performance in home sales?

Sellers may have valid reasons to withdraw from contracts. Signup and view all the answers

Study Notes

Seller Default

A seller may back out of a contract due to various reasons, including changing circumstances or finding a better offer
Remedies for a buyer when a seller breaches contract include:
- Money Damages
- Contract Termination with deposit return and expense reimbursement
- Specific Performance (forcing sale completion)
Courts are reluctant to force sellers to sell
Contingencies may excuse a seller from fulfilling the contract
A seller may be excused if, for example, they are unable to find a new home after good faith efforts despite a contingency in the contract
If a seller breaches a contract without valid contingencies, the buyer may be entitled to terminate the contract and recover payments made

Buyer Default

Remedies for a seller when a buyer breaches contract include:
- Forfeiture of Earnest Money
- Money Damages
- Contract Termination with deposit return and expense reimbursement
- Specific Performance (forcing sale completion)
Courts are hesitant to force buyers to complete a purchase
It's difficult to recover more than earnest money from a buyer, especially if they lack the financial ability to purchase the home
A substantial earnest money deposit serves as a financial assurance and encourages buyer commitment

Common Points

Earnest Money: Funds paid by the buyer to the seller as a deposit and a show of good faith
Distribution of Earnest Money:
- Requires agreement from both buyer and seller
- Disputes are resolved by a court, with funds deposited until a decision is reached

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Description

This quiz delves into the intricacies of real estate contracts, focusing on the rights and remedies available to both sellers and buyers in the event of contract defaults. It covers seller defaults due to various reasons and the remedies buyers can seek, along with the repercussions for buyers who breach contracts. Test your knowledge on this essential aspect of real estate transactions.