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Default Purchase Agreement Attorney in Los Angeles, California

Real estate transactions sound simple on the surface. One party has property to sell, and the other party wants to buy it. Of course, there may be some haggling on the price—but once that is agreed to by the parties, everything should fall into place.  

Unfortunately, things do not always go as planned. Even after the parties have signed a purchase agreement, one of them may not honor its terms and conditions. If this occurs, what legal recourse does either party have? 

At Builders Law Group, Inc., we craft and review purchase agreements for clients in Los Angeles, California, and throughout the counties of Ventura, Riverside, Orange, San Bernardino, and San Diego. Whether someone wants to back out of a purchase agreement or someone else defaults on them, our job is to protect our clients’ interests. Set up a consultation with our attorney today.  

What Does the Purchase Agreement Do? 

Purchase agreements are real estate contracts. They lay out who is selling and who is buying the property, the address or description of the property, the price the buyer will pay the seller, and the date the property will transfer from seller to buyer, along with any other critical dates. The agreement should also include any disclosures by the seller about the property, as well as any contingencies that must be met before the sale is finalized. Finally, sellers and buyers must sign the agreement.  

Contingencies comprise a vital part of the real estate contract. They address issues that will allow a party to back out of the agreement without penalty if the conditions of a contingency are not met. For example, a sale may be contingent upon the sale of the buyer’s current property, upon the buyer’s ability to obtain a mortgage from a lender, or upon the results of an inspection of the property.  

Essentially, the agreement details what each party agrees to do to fulfill the transaction, and the timeline they will adhere to in the process. Default purchase agreements are failures by either party to comply with the legal duties each has agreed to by signing them. Because the purchase agreement is a legal document, there are ramifications when a party defaults.  

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What Happens if a Buyer Defaults on a Purchase Agreement? 

Real estate purchase agreements are inherently time sensitive. That is why many potential defaults are failures to comply with the schedule both parties agreed to. For example, a seller may fail to provide in a timely manner disclosures, information critical to the title of the property, and inspection reports.  

Buyers could default by failing to place the earnest money in escrow as scheduled, not completing loan paperwork or signing off on disclosures in a timely manner, or not obtaining the necessary insurance coverage. If there is no contingency for the inability to obtain financing, the buyer would be in default if their initial financing falls through. Additionally, the buyer would also be in default if they fail to release the seller from contingencies as they are met.  

You may be wondering, “Can I back out of a real estate contract in California?” It happens more often than you might think, especially if the purchase agreement does not provide for a contingency that later occurs, or if someone simply changes their mind.  

If the buyer defaults on any requirement of the purchase agreement and there is no contingency for doing so, the seller can pursue certain recourse as compensation for the damages they have incurred. Likewise, if the seller defaults, the buyer can pursue compensation as well.  

What Are the Legal Remedies When a Seller or Buyer Defaults on a Purchase Agreement? 

Some of the penalties the buyer or seller faces if the other party defaults on the purchase agreement are described in the agreement itself. For example, by signing the contract, the buyer agrees to lose their earnest money if they default. Nonetheless, the buyer could fight the seller’s right to collect by challenging the circumstances or challenging the agreement itself. Moreover, the seller could attempt to make the defaulting buyer pay more than the earnest money.  

In these situations, reaching out to a real estate attorney is a wise choice. Your attorney can help you explore your legal options, including filing for breach of contract if a defaulting buyer will not release the money in escrow to the seller.  

As a seller, you may have damages in excess of the escrow amount. For example, the purchase agreement was for a certain sum of money. However, when the buyer defaulted, you had to sell it for less. You could sue the buyer for the difference.  

A seller may also have incurred costs such as repairs demanded by the buyer or paid for inspections or appraisals. Rather than eat that cost, the seller may be able to pursue compensation from the would-be buyer.  

Finally, a seller can ask the court to compel the buyer to complete the sale. This may be challenging if the buyer defaulted due to a failure in financing. However, it may be the best move if the buyer defaulted because they simply changed their minds.  

Default Purchase Agreement Attorney in Los Angeles, California

Whether you are a buyer or seller, real estate is a major investment. You trust that when you agree to sell or purchase, the other party will honor the agreement you have both signed. If you are a seller, talk to Builders Law Group, Inc., about drafting a purchase agreement that will protect your investment. If you are a buyer, have us review the agreement so we can recommend revisions that will protect you in the transaction. Contact us at Builders Law Group, Inc., in Los Angeles when you’re ready to get started.