Can You Be Sued for Walking Away from a Real Estate Closing in Maryland?

Real estate transactions often involve long processes comprised of many steps. Real estate is often one of the most expensive things a person owns. Even businesses may hold real estate as one of their most valuable assets. Buying and selling real estate often comes with steps forward and steps backward, and deals may change or fall through at any step – even in the days leading up to closing. Until closing, a real estate transaction may be canceled, but canceling the sale or purchase too near to the date of closing may lead to lawsuits. Baltimore real estate lawyer William S. Heyman of the Heyman Law Firm explains.

Can You Get Sued for Backing Out at Closing?

For those unfamiliar with the process of buying and selling real estate, it may be unclear why there would be a problem with backing out of a deal before closing. If the deal is not yet closed, it may seem as if the contract is not complete and there should be no penalty for deciding to cancel the transaction; however, most real estate purchases, both residential and commercial real estate, are subject to a contract long before the closing date. Breaching your contract can lead to a lawsuit.

When you negotiate a real estate transaction, the buyer usually makes an offer on the property, and the seller accepts that offer. Offer and acceptance, along with some other technical elements, make up the core basis of a contract. If the buyer agrees to pay the seller for the real estate and the seller accepts that offer, the real estate contract is already formed. Both parties are then under a legal obligation to go through with the exchange. Closing is when the items are actually exchanged and the terms of the transaction are carried out.

Usually, realtors and real estate lawyers will use detailed real estate contracts to explain the purchase price, how property tax will be paid, whether there will be a seller concession or another similar element, and what duties will be executed prior to the transaction. Tasks such as land title searches, code inspections, and others take time; hence, the contract arranges how these tasks will transpire as well as identifies which party pays for each task. The contract also includes the final closing date.

If, between signing the contract and the closing date, a party wants to back out of the sale, they may be sued for breach of contract.

Damages for Breaching a Real Estate Contract Before Closing

Both parties make payments and spend money when engaging in a real estate transaction. The buyer pays the down payment and places funds into escrow. They may also pay property taxes, fees for title searches, fees for inspections, and other necessary payments. The seller may pay for services as well and their realtor may have paid for marketing and listing. When a real estate transaction is not completed, everyone involved may have suffered some financial harm, which leads to damages and options for relief.

The first possible remedy is monetary damages for the money you already spent. In other words, being paid back for any expenses you incurred, such as escrow payments, if the other party backed out. The party who breached the contract is responsible for reimbursing the non-breaching party for any harm they suffered. For instance, a seller who breaches the agreement may be responsible for returning the deposit and paying the buyer back for other harms. If the buyer breaches the agreement, the seller may be able to keep the deposit as monetary damages and, potentially, the seller’s realtor may be able to claim damages for the cost of marketing the property. Additionally,

if the buyer backs out and the seller cannot find another buyer willing to buy at that same price, the original buyer may also be responsible for the difference in sale price.

You may also be able to fight for relief known as “specific performance.” This remedy involves a court ordering you to follow through on the terms of the agreement. That is, the court may order the seller to sell the house under the terms of the contract or order the buyer to pay in accordance with the contract..

Specific performance is problematic in many real estate transactions. It is more common that the court may force the seller to turn over the property as promised and rather than order a buyer to buy property they do not want to buy.

A lawyer can explain the potential risks and dangers you face and help you understand the consequences of waking away from closing in your specific case.

Call Our Baltimore Real Estate Lawyers

If you are considering buying or selling real estate in Maryland, talk to an attorney about your real estate contract before making any decisions to enter into an agreement or walk away from a transaction. The Baltimore real estate litigation attorneys at the Heyman Firm may be able to help you if your real estate case goes to court. To schedule a consultation, contact our lawyers today at (410) 305-9287.