Can I Sue for a Breach of Contract by a New York Real Estate Buyer?

If you are selling property in New York, you may wonder what options you have if a buyer breaches the real estate contract with you. A breach means the buyer does not fulfill their obligations after they have made an offer on the property and you have accepted it, which created a contract. These cases can get contentious pretty fast which is why working with a New York real estate lawyer can help get things resolved in your favor. Common breaches of contract in New York real estate include:

  • A buyer failing to obtain agreed-upon financing prior to the closing date, which is a common point on which most real estate contracts hinge;
  • A buyer cannot complete the purchase because they have not sold their home prior to closing on the property in question;
  • Failing to pay on time; and
  • A buyer’s failure to properly deliver the deed of property.

If the real estate contract to purchase property is accompanied by the usually earnest money deposit equaling 10% of the purchase price, the circumstances of the breach will dictate if the buyer is entitled to a refund of the money. It is generally assumed a seller will retain the earnest money deposit if the buyer doesn’t uphold their end of the purchase agreement, but it’s best to avoid conflict and write these terms into the sales contract to make this a binding term.

If a buyer breaches and backs out of the contract, whether the buyer had a valid reason to breach determines if they get back their earnest money deposit. If a buyer simply changes their mind, they would likely forfeit their deposit; unlike a situation where they were denied proper financing and notified seller as provided under the terms of the contract.

As a seller, if the buyer breaches the real estate contract there are usually three remedies available to them:

  • Filing a lawsuit for breach of contract;
  • Keeping the initial earnest money deposit and subsequently terminating the contract; and
  • Bringing a suit for specific performance.

If both buyer and seller believe they are entitled to the money after a breach, the seller can sue for breach of the real estate contract. However, it’s important to remember in most situations, the terms of the sales contract may place limitations on a seller’s options.

If a seller is ready, willing, and able to sell and the buyer defaults for reasons other than those permitted by the contract or contingency provisions, the seller can properly terminate the sales contract and keep the earnest money – usually even if the amount of the payment exceeds the seller’s damages from the buyer’s breach. The seller can sue and receive specific performance only if monetary damages will not adequately compensate them and their sales contract does not solely limit them to liquidated damages limited to the amount held in escrow. When suing for breach of contract, the seller will only receive monetary damages above the earnest money amount if the seller can show that after the buyer’s breach they were only able to sell the property for less than offered by the buyer.

New York Real Estate Lawyer

In a breach of contract situation and not sure what to do? Get in touch with a New York real estate lawyer at MOWK law to learn about your options and how we can help get things resolved quickly. We look forward to hearing from you!