May 27, 2024
Consequences Of Breaking A Real Estate Contract Craig Cherney, Esq.

Understanding the Importance of a Real Estate Contract

When you decide to buy a property, the next step is usually signing a real estate contract. This legally binding document outlines the terms and conditions of the transaction, protecting both the buyer and the seller. However, there may be instances where a buyer needs to break a real estate contract. Knowing the proper steps and implications is crucial to avoid any legal consequences.

Reasons for Breaking a Real Estate Contract

There can be various reasons why a buyer may need to cancel a real estate contract. Some common examples include:

1. Financing issues: If the buyer is unable to secure the necessary financing within the agreed-upon timeframe, they may have to break the contract.

2. Inspection concerns: If the property inspection reveals significant issues that the buyer is not comfortable with, they may choose to cancel the contract.

3. Personal circumstances: Unexpected life events, such as job changes, health issues, or family emergencies, can also lead to a need for contract cancellation.

Reviewing the Contract Terms

Before proceeding with cancelling a real estate contract, it is essential to thoroughly review the terms and conditions outlined in the agreement. Pay close attention to any clauses related to contract termination, such as contingencies or specific deadlines.

Consulting with a legal professional or real estate agent can help ensure that you fully understand the implications of breaking the contract and what steps to take next.

Notifying the Seller

Once you have decided to break the real estate contract, it is crucial to notify the seller as soon as possible. This should be done in writing and should clearly state your intention to terminate the agreement.

It is recommended to send the notice via certified mail or email to have a record of the communication. Make sure to keep copies of all correspondence for future reference.

Negotiating a Mutual Agreement

After receiving your notice, the seller may propose a negotiation to resolve the issue without going to court. This could involve discussing potential solutions or amendments to the contract terms that may satisfy both parties.

Keep in mind that reaching a mutual agreement can save time, money, and potential legal complications. However, be cautious and consult with your legal advisor before agreeing to any changes.

Considering Legal Consequences

If both parties cannot reach a mutual agreement or the seller does not agree to cancel the contract, legal actions may be necessary. This can result in financial penalties or even a lawsuit.

Working with an experienced real estate attorney can help navigate the legal process and protect your rights as a buyer. They will guide you through the necessary steps to resolve the situation effectively.

Protecting Your Earnest Money

One important aspect to consider when breaking a real estate contract is the fate of your earnest money deposit. This is a sum of money that buyers usually provide as a sign of good faith when making an offer.

If the contract is terminated legally and within the agreed-upon terms, the earnest money should be returned to the buyer. However, if the contract is broken without a valid reason, the seller may be entitled to keep the deposit.

Learning from the Experience

Breaking a real estate contract can be a stressful experience. It is essential to take the time to reflect and learn from the situation, ensuring that similar issues do not arise in future transactions.

Consider discussing the reasons for the contract cancellation with your real estate agent or attorney to gain insights and avoid making the same mistakes in future deals.


While breaking a real estate contract as a buyer is not ideal, there are instances where it may be necessary. Understanding the process, legal implications, and potential consequences is crucial to protect your rights and interests.

Always consult with legal professionals and trusted advisors to ensure you are making informed decisions and taking the appropriate steps to resolve the situation effectively.