Updated: Jun 9, 2020
Purchasing a new house can be an intimidating process for new homebuyers. Even after you find the house you want, you have to go through inspections, repairs, and lots of paperwork. For some people, the process becomes too much, and they decide to back out of the deal. What are the risks of making that decision?
Most people sign a written agreement when they put in an offer to buy a house and deposit some amount of money with the real estate agent. This money is sometimes referred to as "earnest money" or "hand money." Like any other contract, the terms of the purchase are governed by the language of the written agreement. This can also include terms that set forth what happens when a buyer fails to complete the sale, or in other words, when the buyer defaults. However, the consequences of a buyer defaulting on an agreement to purchase real estate usually fall into three potential remedies.
One option is for the seller to file a lawsuit to compel the buyer to follow through with the transaction, known as specific performance. Although this option is available to all sellers of real estate in Tennessee, it is not common and can be very difficult to win. Second, and most common, is for the seller to keep the earnest money that was paid when the agreement was signed and relists the property. Finally, the seller also has the option of filing a lawsuit against the buyer for damages if the house is resold at a much lower price than was agreed upon with the initial buyer. The likelihood of this happening depends on a number of factors, including whether the difference in price is enough to justify the expense of a lawsuit. Whether that risk is acceptable is up to the buyer.