What Are the Damages for Breach of a Real Estate Sales Contract?

Whether you were in a residential or business contract for a real estate purchase, there are certain damages that could apply if there is a breach of contract. Then, you can rest assured that you won’t have a total loss on your hands and you’ll be able to recoup at least some of your money.

Here are the damages you may be able to expect if you hire a real estate contract lawyer to help you out.

Loss of Bargain Damages

General loss of bargain damages are for a total breach of contract. The damages are the difference between the agreed contract price and the market value of the property on the date in which the breach occurred.

Here’s an example to make this a bit clearer: Let’s say that the seller sold you a property for $200,000 at the time of the total breach. The property was worth $140,000. You, the buyer, who was not responsible for the breach, would be able to potentially recoup $60,000 in losses. If the value of the property had gone up to $250,000 on the date of the breach, if the seller is in total breach, then you could be entitled to $50,000.

Things to Keep in Mind With Bargain Damages

Loss of bargain damages are not always so straightforward. You’ll also need to take into consideration the following:

  • Future market fluctuations are irrelevant when it comes to loss of bargain damages. The person who was not responsible for the breach of contract would only be entitled to the difference between the contract price and the market value of the property on the date that the breach occurred.
  • A seller’s good faith but lack of conveying good title could affect the recovery of loss of bargain damages. If a seller acted in good faith but could not convey satisfactory title, then the courts may differ in their opinion over how to settle the loss of bargain damages. Nearly half of the cases in these circumstances limit the buyer’s recovery to return of earnest money. Plus, the buyer’s other payments with interest and incidental damages like loan application costs, abstract and title examination could be limited as well.

Special Damages

Along with loss of bargain damages, you may be able to recover special damages if there is a breach of contract with the selling or buying of a property. Each of these special types of damages needs to satisfy a foreseeability test, which illustrates that damages were within the contemplation of the contract when the contract was created.

These special damages include:

  • Loss of profit. You may have been looking to purchase a property with the intent of flipping it, selling it or renting it out to make money. You may be able to obtain loss of bargain damages and expenses and loss of profit in some situations. However, it can be very difficult to also receive loss of profit damages, as there are many obstacles you’ll have to overcome. They include foreseeability and reasonable certainty.

The loss of profit must be foreseeable, which means the parties could have contemplated it. This is hotly debated and must be argued in the right way. Reasonable certainty means that the loss of profit needs to be proven with reasonable, and not total certainty. Recovery may be an option if the proof is there, but the courts typically see claiming a total loss of profit as being unreasonable.

  • Expenses in reliance on the contract. If you started spending money to prepare for the real estate purchase or sale when you assumed the contract was in order, then you may be able to recoup some of your expenses. These expenses include, but are not limited to: Appraisals, the cost to travel to and from the property, surveys, document drafting fees, the seller’s eviction of a tenant, title search, expenses for setting up financing, moving in and out of a property, broker’s commissions and refurbishment of the property according to the contract’s requirements.

How a Breach of Contract May Occur

There are different situations in which a breach of contract could occur. For instance, the buyer may not be able to acquire the financing they need by the time of the closing date, and they need to pull out of the sale.

Additionally, a buyer would be in breach of the contract if they do not pay on time; they might not be able to close escrow on the specified and agreed-upon date. There may be a failure to deliver the deed of property in the correct fashion, too.

If you don’t see your situation listed, it could still qualify as a breach of contract. Make sure you get in touch with a real estate contract lawyer to determine the best course of action for your case.

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