As we said earlier, there are legal remedies for a default. If a buyer fails to perform under the terms of a sale contract, the breach entitles the seller to legal recourse for damages. In most cases, the contract itself stipulates the seller's remedies. The usual remedy is forfeiture of the buyer's deposit as liquidated damages , provided the deposit is not grossly in excess of the seller's actual damages. It is also customary to provide for the seller and broker to share the liquidated damages. The broker may not, however, receive liquidated damages in excess of what the commission would have been on the full listing price. If the contract does not provide for liquidated damages, the seller may sue for damages, cancellation, or specific performance. If a seller defaults, the buyer may sue for specific performance, damages, or cancellation. End of Page 17 . Contingencies 18 . Default 19 . Sale Contract - Primary Provisions
A typical residential sale contract contains the following kind of provisions. Parties, consideration, and property. One or more clauses will identify the parties, the property, and the basic consideration, which is the sale of the property in return for a purchase price. There must be at least two parties to a sale contract: one cannot convey property to oneself. All parties must be identified, be of legal age, and have the capacity to contract. The property clause also identifies fixtures and personal property included in the sale. Unless expressly excluded, items commonly construed as fixtures are included in the sale. Similarly, items commonly considered personal property are not included unless expressly included. Legal description. A legal description must be sufficient for a competent surveyor to identify the property. Price and terms. A clause states the final price and details how the purchase will occur. Of particular interest to the seller is the buyer's down payment, since the greater the buyer's equity, the more likely the buyer will be able to secure financing. In addition, a large deposit represents a buyer's commitment to complete the sale. If seller financing is involved, the sale contract sets forth the terms of the arrangement: the amount and type of loan, the rate and term, and how the loan will be paid off. It is important for all parties to verify that the buyer's earnest money deposit, down payment, loan proceeds, and other promised funds together equal the purchase price stated in the contract. End of Page Loan approval. A financing contingency clause states under what conditions the buyer can cancel the contract without default and receive a refund of the earnest money. If the buyer cannot secure the stated financing by the deadline, the parties may agree to extend the contingency by signing next to the changed dates.
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- Fall '16