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WHAT CAN I DO AS A BUYER TO A REAL ESTATE CONTRACT WHEN THE SELLER TRIES TO BACK OUT OF THE CONTRACT?

It is not an uncommon problem where a seller of real estate enters a contract to sell the property and then attempts to back out of the contract.  Sometimes there are innocent reasons why a seller would do this, but often attempts to back out of the contract are motivated by the seller receiving a later, higher offer, or learning that the property is now worth more than when the seller entered the contract with the buyer.

Real estate contracts once signed by both buyer and seller are enforceable contracts that include obligations of both the buyer and the seller, as well as rights of both the buyer and the seller.  If a seller tries to back out of or breach the contract and refuses to follow through on selling the property, the buyer has remedies, which are informed partly by the terms of the real estate contract and partly by the law in California.

A buyer of real estate who has been learned that the seller wishes to back out of the contract and not sell the property to the buyer, would first look to the real estate contract to determine next steps.  If the contract is the form contract from the California Association of Realtors, there typically would be first, an obligation to provide the seller written notification.

If after notifying the seller, the seller continues to refuse or fail to cooperate, depending on the terms of the contract, the buyer either demands mediation or arbitration, or files a lawsuit for damages and/or what’s referred to as specific performance, which is an action to obtain a court order, forcing the seller to sell the property to the buyer under the terms of the original contract.

Most real estate contracts contain an attorneys’ fees clause, which states that in the event that one party to the agreement has to file a lawsuit against the other party, the prevailing or winning party to that lawsuit would be entitled to recover their attorneys’ fees.  Therefore, if a buyer is forced to file a lawsuit against a seller for the seller’s failure to fulfill their contractual duties, the buyer may be able to recover their attorneys’ fees in having to file and prosecute that action.

The most important thing to keep in mind under these circumstances is the need to act quickly.  If the seller successfully sells the property to another buyer prior to you commencing a lawsuit, you probably would be limited to a lawsuit and claim for damages, as the court probably no longer under those circumstances would be able to force the sale of the property to you since the seller no longer owns the property.  Therefore, it is very important that under these circumstances you get quick legal advice and act swiftly.

I regularly represent clients in lawsuits involving real estate contract disputes. If you have questions, or need representation by a California real estate attorney involving a contract dispute, please feel free to contact me to arrange for a consultation at (510) 465-0025.

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