Remedies for A Real Estate Buyer when Seller Breaches Your Agreement to Buy

GOMEZ SIMONE Dec. 8, 2016

Buying a home is a huge undertaking and can be overwhelming. People invest a lot of time, money and emotions on how to find the right home and closing the deal. Unfortunately, not all real estate transactions go as smoothly as planned. A common question our clients have is what remedies they may be entitled to when a seller breaches a contract to a real estate transaction. Fortunately, a person buying a home has several remedies available if a seller wrongfully fails or refuses to perform obligations under a contract for the sale of real property. A buyer’s recoverable damages for the seller’s breach of contract will be defined either (1) by the terms of the contract (a valid liquidated damages clause); or (2) if there is no applicable contract provision, by statute (CC §§ 3306 or 3300).

If the seller fails to execute the terms of a contract altogether by refusing to convey title, the buyer’s recovery can be calculated using Civ. Code §3306. These damages include:

  • the price paid;

  • the expenses incurred in investigating title and preparing the necessary papers;

  • the difference between the agreed purchase price and the market value of the property at the time of breach;

  • the expenses incurred in preparing to enter on the land;

  • consequential damages according to proof; and

  • interest

Another remedy when buying a home is specific performance. If the contract is solid, the recourse for the buyer facing seller breach by refusal to sell, is to file for a complaint for specific performance and also to file a notice of lis pendens with the county recorder’s office. Specific performance is available if the seller has the ability to perform but is unwilling to do so. In plain English, specific performance means you’re asking the court to order the seller to sell the home as originally planned. The primary down side to the specific performance remedy is that the seller must refrain from attempting to sell the property while the lawsuit is pending. Additionally, specific performance is not often granted. Courts are often unwilling to force a homeowner to sell, particularly if the seller now plans to remain in the home.

Incidental damages are also available to a buyer. Incidental damages are typically out-of-pocket expenses incurred in performance, preparation and reliance on the contract. See, e.g., Walpole v. Prefab Mfg. Co. (1951) 103 Cal. App. 2d 472, 489. In any case (whether or not the property’s fair market value exceeds the contract price), the buyer is entitled to recover its costs of examining title, documentation costs and expenses properly incurred in furtherance of the contract. CC § 3306; cf. Baran v. Goldberg (1948) 86 CA2d 506, 511-512, 194 P2d 765, 769.

At Gomez & Simone Law, we are specialize in Real Estate and have many years of experience on the field and buying a home for you will be easier.