"DEAR BEV" - JUST THE FAQ"S: Should Seller who backed out reimburse Buyer for cost of inspecting the house?
Q I made an offer to buy a house and it was accepted. I then spent money having inspections performed, but before the contract was signed, the seller backed out of the deal to sell the house to another buyer, at a higher price. Shouldn't the seller have to reimburse me for the money I spent on the building inspections. What recourse do I have?
A Unfortunately, this situation happens in real estate. It happens more often in a real estate market which is "hot" -- that is, there are more buyers for houses than there are houses for sale. It happens less frequently in the type of slow real estate market we are currently experiencing.
The specific answer to your question may depend upon the laws, customs and practices of the state in which the real estate is located. We can discuss some general principles that apply in most situations of this type. For example, New York and Connecticut, where we practice, have both established the long-standing principle that to be enforceable a contract for the sale of real estate must be in writing. And, in writing means that both parties must sign the contract and it must be delivered by the last signing party to the other.
On the other hand, buyers and sellers may enter into preliminary agreements, which also must be in writing, signed and delivered called “Binders” or “Offers to Purchase.” Since the freedom to contract a fundamental right, the parties can agree in such preliminary agreements that, to use your example, the cost of inspections is reimbursable if a final contract is not signed. If there is such a “Binder,” then you may be entitled to reimbursement for your costs. Read the Binder.
But, unless in the initial "Binder" or "Offer to Purchase" all parties to the transaction agree to reimburse the buyers for inspections if the seller backs out, you have no recourse. There are always risks in buying and selling real estate. While most sellers honor the "accepted offer" and go forward with the sale, some don't and buyers foot the bill. I always recommend to buyers that any offers that are made and accepted be accepted with the understanding that all other offers are to be "back up offers" only. It's no guarantee but hopefully acts as a reminder to all concerned that they have an obligation to deal with each other in good faith.
