Buyer in breach of contract

[Jeffers]

What is the name of your state? Minnesota

Our buyer backed out last month because she did not qualify at the interest rate she hoped for. The purchase agreement says she can back out if she doesn't qualify at "market rate." Even though she doesn't like the interest rate, it is still at "market rate." We did not sign the cancellation, instead we had an attorney write a letter threatening legal action if she doesn't close within the next two weeks. We haven't heard anything and I'm afraid the buyer is still not going to close. We have been trying to sell our house for a year and we haven't had any other offers. If we choose to proceed with legal action, approximately how much will it cost and how long would it take to get this buyer to close?

 

[JETX]

If we choose to proceed with legal action, approximately how much will it cost and how long would it take to get this buyer to close?

Save your money. The courts will NOT force someone to close on a property. The best you could hope to recover is your PROVABLE damages, less the earnest money.
Presumably, your contract provides for them to forfeit earnest. Take it, cancel the agreement and find another buyer.

 

[Jeffers]

I don't get it. I thought the purchase agreement was a legally binding contract. We should be able to keep the earnest money regardless as she had no legitimate reason to cancel according to the contract. Isn't there anything else we can do before canceling? The market is horrible right now and who knows how long it would take for another offer.

 

[tranquility]

It is a contract, that's why you are entitled to damages. However, it is very hard to prove damages in a property-purchase situation. Part of the difficulty is the lack of liquidity in real property. How much did you suffer as compared to the benefit of the bargain? Now, prove it. That's why most professionally-prepared contracts have a liquidated damage section where a sum certain is awarded to the non-breaching party.

On top of that, proving a term like "market" rate is hard. Did you go into a lot of detail describing what this was? If not, the other party will claim it is the rate a person with great credit can get when they put down 20% of the purchase price in cash and you will claim it is any interest rate charged in the marketplace. Even proving breach may be hard.

Finally, courts are loath to impose mandatory injunctions. The court then has to spend too much time overseeing the transaction. Imagine all the orders a court would have to make to insure a person gains financing and buy a house. What interest, what terms, what documentation, how soon delivered, and etc.--forcing a person through the steps could be a full-time job if the other party is being difficult. Then the remedy is contempt and put the person in jail. Is that going to get your house sold?