What to Do When a Property Transaction Can’t CloseWhen you buy or sell a property, the transaction is governed by an Agreement of Purchase and Sale. This contract outlines the conditions of the deal and defines the rights and responsibilities of both parties. It specifies key details such as the purchase price, deposit requirements, financing obligations, and deadlines that must be met before closing.Because the agreement is legally binding, failing to meet these obligations can lead to significant legal and financial consequences.Every real estate transaction also includes a closing date,&nbsp;the day ownership of the property transfers from the seller to the buyer. But what happens when the transaction cannot close on the agreed date? Let’s look at the most common reasons this occurs and what options may be available to buyers and sellers.Why Transactions Sometimes Fail to CloseThere are several reasons why a property transaction may fail to close on time.On the buyer’s side, the most common issue is financing. A buyer may not have sufficient funds for the down payment or may be unable to secure a mortgage approval. In some cases, a buyer may also be unable to close because they have not successfully sold their previous home.Problems can also arise on the seller’s side. A seller may face difficulty discharging an existing mortgage or other registered claims on title, such as a home equity line of credit (HELOC) or secured renovation loan.In other situations, the issue may involve a breach of the agreement itself. For example, if a seller fails to complete agreed inspections, does not remove tenants when vacant possession was promised, or fails to disclose significant defects, the transaction may stall.When Failure to Close Becomes a BreachAccording to legal guidance from ME Law, when a real estate transaction does not close, liability typically rests with the party that breached the contract.Sometimes the issue preventing closing can be resolved if both parties agree to extend the closing date. This can allow time for financing to be finalized, documents to be corrected, or title issues to be cleared. However, not every situation can be resolved through an extension.If the failure to close amounts to a breach of the Agreement of Purchase and Sale, the affected party may pursue legal remedies.When a Buyer Fails to CloseIf a buyer fails to close the transaction, the seller may be entitled to several remedies under contract law.These may include:<ul><li style="text-align:justify;">Specific performance, requiring the buyer to complete the purchase</li><li style="text-align:justify;">Resale loss damages, if the property later sells for a lower price</li><li style="text-align:justify;">Carrying costs, such as mortgage payments, taxes, and utilities incurred while waiting for resale</li><li style="text-align:justify;">Incidental losses related to the failed transaction</li></ul>Even if the buyer’s inability to close was outside their control, they may still be responsible for compensating the seller for resulting financial losses.When a Seller Fails to CloseA seller can also be in breach of the agreement.This may occur if a seller attempts to delay the closing, renegotiate the price, accept a higher offer after signing the contract, or fails to provide vacant possession when it was required.In these cases, a buyer may pursue legal remedies such as:<ul><li style="text-align:justify;">Specific performance, forcing the seller to complete the sale</li><li style="text-align:justify;">Injunctions, preventing the property from being sold to another buyer</li><li style="text-align:justify;">Financial damages</li><li style="text-align:justify;">Return of the buyer’s deposit</li></ul>While historically less common, seller defaults have become somewhat more frequent in recent years.This can happen if sellers underestimate the funds required to close. For example, they may miscalculate the cost of discharging their mortgage, overlook additional secured debts on the property, or fail to account for outstanding property taxes or closing adjustments. If these obligations cannot be satisfied, the seller may be unable to complete the transaction, which can place them in breach of contract.What Buyers and Sellers Should DoMost real estate transactions close smoothly. However, when a deal runs into trouble, time is critical.Whether you are a buyer or a seller, it is important to seek professional legal advice as soon as possible. Delays and disputes rarely resolve themselves. Addressing the issue quickly can help minimize both financial losses and emotional stress.Real estate contracts carry serious obligations. Understanding your rights, and acting quickly when problems arise, can make all the difference when a transaction cannot close as planned.

What to Do When a Property Transaction Can’t Close

What happens when a real estate deal can’t close? Learn with RIFO about the legal consequences, common causes, and remedies for buyers and sellers.

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