Question:

What are the penalities for breaking a real estate contract?

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...if the SELLER decides not to sell the house after signing the contract, but before final closing?

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  1. Depends if he had a good legal reason or not.  If he just changed his mind, that's not good enough.  In the US, this is one of the few contracts that can be enforced with "specific performance".  The means that a court can order the house turned over to the buyer, plus penalties for costs of living somewhere else, plus all buyer's legal fees.

    But if the BUYER was the first one to break any provision of the contract or real estate law, then the seller might have a good reason to cancel the contract.


  2. They would have to return any earnest monies. If you are the buyer, you might be able to sue to force them to perform, if you didn't agree to Arbitration.

  3. Depends on what the buyer pursues.  If the buyer is sufficiently generous to let the seller off the hook entirely, nothing happens.  If the buyer pushes the issue (and has met all the terms of the signed contract) the seller can be sued for specific performance and damages.

    In the case of a seller backing out, any judge is going to look for a very serious excuse to not complete the contract, and will generally find in favor of the buyer.  Damages can be VERY high, including moving expenses, replacement housing costs, etc.

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