Home Sale Falls Through
Ask the Real Estate Lawyer: Real Estate Law Q&A
REM #LAW 703
By Ilyce R. Glink and Samuel J. Tamkin
Summary: A reader had a sales contract fall
through on the closing date. Sam and Ilyce help them him determine where the
deal went wrong.
Q: We recently had a sales contract fall through on a house we are trying to
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The buyer's lender provided us with a loan approval letter within the stated
contract time. Following the approval letter, the lender claimed that the buyer
failed to meet the conditions of the approval letter. We were not made aware
of this until the closing date.
The buyer failed to schedule utility hookups, despite requesting that we schedule
with the utility company to disconnect the utilities. We were forced to provide
heat using portable heaters to prevent pipes from freezing the weekend after
the closing was supposed to have occurred. The buyer was acting as his own agent
and is a licensed real estate agent.
Who can we expect to have liability in the transaction? Is it the buyer/agent,
the lender, the agency/broker, or some combination of all three? What damages
associated with the transaction can we request they pay for?
A: Many real estate purchase contracts permit buyers to terminate a deal risk-free
if they fail to obtain financing for their purchase. The catch is that they
must cancel the deal within a certain time period after signing the purchase
If your buyer failed to notify you as required under the contract and then
failed to close, the buyer is probably in default under the terms and conditions
of the contract.
When a buyer is in default under the contract, the contract may specify the
remedy available to the seller. In some cases, the only remedy available to
the seller is keeping the earnest money deposit paid by the buyer. If the buyer
put down five thousand dollars to buy the home, that down payment would be lost.
It may be less than your actual damages, but that is the remedy specified in
If the contract allows you to sue the seller for your damages caused by the
sale falling through, you can recover all of you costs associated with the dead
deal. These costs may include additional interest payments, costs to heat the
home, other reasonable costs to protect the home and if you ultimately sell
the home for less money than what you had agreed to with the old buyer, you
may be able to get the difference.
Of course, you would have to sue the buyer and prove your damages and you would
want to be represented by an attorney that has experience in this kind of litigation.
Finally, your beef is with the buyer: The buyer failed to close. Just because
the buyer was a real estate agent does not make that agent’s company responsible
for his failure to close the deal.
Your contract was with the buyer and you would not have the ability to sue
the lender. Anyway, it doesn’t seem that the lender was responsible for
the buyer’s failure to abide by the terms of the deal. It was up to the
buyer to terminate the deal in a timely manner if he couldn’t get financing.
And if the contract did not give the buyer the right to terminate as a result
of his failure to get financing, then the buyer assumed the risk that he could
or could not get financing to close the deal.
In most circumstances, if a buyer is wronged by his lender and cannot close
on a property because of this particular problem, it is the buyer – not
the seller – who can sue the lender.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce
R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your
Home Faster and For More Money In Any Market. If you have questions for
them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022
or contact them through Ilyce’s website www.thinkglink.com