Q: I deposited earnest money to buy a house, but did not make selling my house a contingency of the contract.
Now it appears that I will not be able to sell my house. What will my damages be if I don’t buy the house? Will I lose my earnest money? Can the listing agent sue me for the commission?
A: As the market shifts around the country, more sellers are getting caught in the slowing market — where some homes are taking longer to sell or don’t sell at all.
You signed a contract to buy a home and if you fail to close on the purchase, the seller may be able to enforce the terms of the contract against you.
What could you lose? If the contract limits the seller’s damages to the amount of earnest money you deposited, you may very well end up losing your earnest money.
But if the contract allows the seller to sue you for damages, you could lose more than just the earnest money. The total amount of damages could include the additional cost of keeping the home he or she would have sold to you, including mortgage payments, real estate taxes, insurance and other expenses. If the seller ultimately sells the house for less than what he was going to get from you, he may be able to sue you for the difference between what you would have paid and what the he ultimately got from the sale.
You need to review your purchase contract and determine what remedies the seller has under the contract. A real estate attorney may be able to help you go through your options, and may even be able to help you negotiate a fair settlement.
Finally, you didn’t sign any agreement with the listing broker and should not have any responsibility to pay the broker his fee. The seller is generally the only person responsible for paying a commission on the sale of a home.