What to Do When a Seller Breaches a Real Estate Contract

Sellers may breach an agreement to sell real estate when they receive a better offer, experience a sudden change in circumstances, or otherwise change their mind. A buyer who wants to complete the real estate purchase may be able to force the seller’s hand, due to the unique nature of real estate and the remedy of specific performance.  However, they must first establish a valid contract exists and certain other requirements are satisfied.

Establish a Breach of Contract

A threshold step is to to establish that a valid contract exists, after which there can be an evaluation of whether a breach of contract actually occurred. While verbal agreements can constitute a contract in some instances, A.R.S. § 44-101(6) requires that real estate purchase contracts must be in writing and signed. The contact must demonstrate a “meeting of the minds” and provide definite terms.

Before pursuing relief, the buyer must also determine whether there is any valid reason for the seller to terminate the contract. For example, if the buyer did not provide an earnest money deposit by the time specified in the contract, the seller may be able to terminate. If the seller has the right to terminate the contract, the buyer cannot establish a breach or demand any remedy.

There may be a number of different contingencies that give the seller a legitimate termination right, so your real estate attorney should review your real estate purchase contract to ensure your rights are adequately protected. It is also crucial to note the exact procedures required to terminate the contract. If a buyer fails to satisfy a contingency, giving the seller the right to terminate the contract, the seller still needs to follow the contract’s instructions when terminating the agreement.

Remedies for a Seller Breach

Generally, specific performance is granted only if monetary damages cannot adequately compensate the non-breaching party. A buyer will typically want to move forward with the purchase of real property, as agreed upon in the real estate purchase contract, by demanding specific performance. This type of specific performance is the only way for the buyer to effectively get what they bargained for, because every parcel of real property is unique.  Money alone cannot make them whole

The buyer will have to show that they are ready, willing, and able to complete the purchase of real property, and can file a complaint demanding specific performance. This may be able to motivate the seller to either fulfill their contractual obligations or attempt to negotiate a settlement.  If not, the buyer can proceed to trial seeking an order transferring the property upon payment – specific performance.