We are pleased to share that we successfully represented our clients, the plaintiffs, in a recent case involving a breach of an Agreement of Purchase and Sale (APS) for a residential property. This case underscores the importance of understanding the consequences of failing to close a real estate deal and the legal remedies available to sellers.
Case Overview
In 2022, our clients entered into an APS to sell their property for $1,252,500. The defendant, who was the buyer, waived the financing condition. However, the defendant was unable to secure financing and ultimately failed to close the deal as agreed.
After the failed closing, the plaintiffs re-listed the property and eventually sold it in March 2023 for $965,000. This resulted in a significant shortfall compared to the original sale price. The defendant admitted to breaching the agreement but contested the damages, arguing that the plaintiffs had failed to mitigate their losses. Specifically, the defendant claimed that the plaintiffs should have accepted an offer to purchase the property at a substantial discount several months after the defendant caused the default.
Court's Ruling
The court ruled in favor of our clients, finding that:
Reasonable Actions to Mitigate Losses: The plaintiffs acted reasonably by re-listing the property in an effort to mitigate their losses. The court noted that there was no evidence supporting the defendant’s claim of failure to mitigate damages.
Defendant's Lack of Credibility: The court dismissed the defendant's argument that they had made a credible offer to repurchase the property in January 2023. The defendant failed to provide any proof of financial capacity to follow through with the offer, further undermining their credibility.
Significant Damages Awarded: The court awarded the plaintiffs $366,513 in total damages, broken down as follows:
$287,500 for the difference between the original sale price and the final sale price;
$31,906 for carrying costs, which included utilities, insurance, property taxes, and mortgage interest, covering the period from the failed closing in August 2022 to the eventual sale in March 2023;
$47,107 for additional interest on a loan the plaintiffs had taken to finance the purchase of their new home due to the failed sale.
Key Takeaways
Carrying Costs Can Be Substantial: When a buyer defaults on a real estate transaction, the seller may incur significant carrying costs, including mortgage interest, property taxes, and insurance. This case highlights that these costs are recoverable as part of the damages.
No Obligation to Entertain Lowball Offers: Sellers are not required to entertain significantly lower offers from defaulting buyers, especially when those buyers have already failed to close the deal and cannot demonstrate financial credibility.
Buyers Must Be Prepared to Close: Buyers should ensure they are fully prepared to close a transaction once the financing condition is waived. Failure to do so can result in substantial financial consequences.
Efficient Litigation: This case, which took approximately 14-16 months to litigate from start to finish, demonstrates the effectiveness of the Summary Judgment procedure for these types of disputes. Our clients were able to achieve a favorable result without the need for a prolonged trial, and the legal fees incurred were nominal in light of the judgment obtained.
Conclusion
This case serves as an important reminder of the legal obligations of buyers and the rights of sellers in real estate transactions. We are proud to have represented the plaintiffs in this matter and to have secured a significant judgment on their behalf.
If you have questions about real estate disputes or need assistance with real estate litigation, our team is here to help. We have the experience and expertise to ensure your rights are protected and to guide you through the litigation process.
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