Effective as of August, the GAR Purchase and Sale Agreement provides revised remedies to Sellers and Buyers upon breach of contract.
a. Remedies of Seller: In the event this Agreement fails to close due to the default of Buyer, Seller’s sole remedy shall be to retain the earnest money as full liquidated damages. Seller expressly waives any right to assert a claim for specific performance. The parties expressly agree that the earnest money is a reasonable pre-estimate of Seller’s actual damages, which damages the parties agree are difficult to ascertain. The parties expressly intend for the earnest money to serve as liquidated damages and not as a penalty.
b. Remedies of Buyer: In the event this Agreement fails to close due to the default of Seller, Buyer may either seek the specific performance of this Agreement or terminate this Agreement upon notice to Seller and holder, in which case all earnest money deposits and other payments Buyer has paid towards the purchase of the Property shall be returned to Buyer following the procedures set forth elsewhere herein.
What Changes for a Seller?
With this new change, Seller’s sole remedy for a Buyer’s breach is to accept the Earnest Money as full liquidated damages. Prior to this change, the Seller had the right to pursue “any lawful remedy” such as suing the breaching Buyer for specific performance and/or the losses Seller incurred, which could include the difference between what they could have sold the home for to the Buyer versus another person, Seller’s legal fees, Seller’s additional moving expenses, Seller’s rent, etc. However, in most cases when a Buyer breached the contract, the Seller would accept the Earnest Money and move on, selling the home to another buyer.
Sellers will ask for more in Earnest Money as a result of this change!
What Changes for a Buyer?
Buyer’s remedy for Seller’s default shall be 1) to sue for specific performance or 2) terminate the contract with the return of Earnest Money. In the past, the Buyer could seek all lawful remedies which could have included consequential damages, attorney’s fees, extra moving expenses, rent during holdover, etc.