If the seller of a home cannot close on the agreed-upon date, is this breach of contract and what recourse does the buyer have?

Failing to close on the agreed-upon date would be a breach of contract (assuming that the closing date was one of the contractual terms). However, not all contractual breaches are created equal.

For any breach, the non-breaching party is generally entitled to compensation (“damages”) for any losses or costs it incurred as a result of the breach. However, only quantifiable monetary damages, or damages reducible to a monetary amount, can be compensated. For example, say that as a result of a late closing, home buyers who already sold their own home had to stay in a hotel for a week while storing their belongings. They could seek compensation for the hotel and storage charges, but won’t be compensated for the “disappointment” of not getting into their new home on time.

Other breaches may excuse certain breaches of the seller, or a court, if the matter had to go to court because the parties could not work it out themselves, might “reform” (or modify) the contract to reflect the fact that one breach (the seller’s failure to close on time) caused the buyer to have problems and need some additional time or accommodation. For example, say that the seller couldn’t close on time, so the buyer lost his mortgage. (Mortgage commitments are usually only good for a certain amount of time.) In that case, the buyer would not be in breach of the contract for not having financing, since the buyer’s breach was caused by seller’s. A court might order the contract to be extended, to give the buyer more time to obtain financing.

Sometimes a breach justifies terminating the contract, if the other party wanted to, as when sellers fail to close, don’t set any new or acceptable date for closing, and the buyer needs to terminate the contract and find a new place to live.

There is no single answer as to what happens if the seller can’t close on time. The buyer’s recourse will depend on the consequences of the failure to close, though since that failure would be a breach of contract, the buyer would be entitled to something.

Case Studies: Seller’s Failure to Close and Buyer’s Recourse

Case Study 1: Monetary Compensation for Additional Expenses

In this case, the seller fails to close on the agreed-upon date, causing the buyer to incur additional expenses. For example, the buyer may have to stay in a hotel or arrange for storage of belongings while waiting for the closing to take place. As a result of the seller’s breach of contract, the buyer can seek compensation for these quantifiable monetary damages.

The buyer may file a claim for reimbursement of the incurred expenses and losses caused by the seller’s failure to close on time.

Case Study 2: Reformation of the Contract

If the seller’s inability to close on time leads to significant consequences for the buyer, such as the loss of a mortgage commitment, the court may choose to reform or modify the contract. For instance, the court might extend the contract to provide the buyer with additional time to secure financing.

In this scenario, the buyer’s breach of not having financing would be excused since it was caused by the seller’s failure to close on time. The court’s intervention in reforming the contract aims to accommodate the buyer’s needs and address the impact of the seller’s breach.

Case Study 3: Termination of the Contract

In some cases, the seller’s failure to close on the agreed-upon date, coupled with their inability or unwillingness to set a new or acceptable closing date, may justify the termination of the contract.

If the buyer decides to terminate the contract due to the seller’s breach, they can pursue other housing options and seek legal remedies to recover any expenses or losses incurred during the failed transaction.

Termination of the contract allows the buyer to move on and find a new home without being bound by the previous agreement.