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COVID 19 Remedies Under Standard Montana Real Estate Agreements

Posted on April 2nd, 2020

With the uncertainty COVID-19 is causing the economic future of the US, I recently had a client ask for advice on whether he should forfeit his escrow deposit, which was substantial, rather than follow through on a real estate contract he signed prior to the pandemic madness, or if that option was even available to him.


If you are like most Montanans and used a realtor for the purchase or sale of your home, then the contract that most likely governed your transaction was the Montana Association of Realtors Buy-Sell Agreement form.  This contract gives a seller three options when a buyer, through no fault of the seller, decides to walk from the deal: 1) declare the earnest money to be forfeited; OR 2) demand the buyer specifically perform; OR 3) demand monetary damages.  Notice that in this scenario, because the buyer is a fault, the seller has the option to choose which remedy to enforce.


The forfeiture of the escrow deposit is usually the “easiest” option for a seller because it does not require any court action.  However, in Montana, escrow deposits tend to be well under 10 or 20 percent of the purchase price, which is standard in some other states, and can be as little as $500-$1,000.  Accordingly, a seller may choose one of the other two options.


Specific performance is an order by a court that a contract be fully performed according to its terms, or in other words, an order from a judge that both parties must proceed with the closing of the purchase and sale.  While most cases involve the buyer of real property requesting specific performance from the seller, the law recognizes that the seller has a remedy in specific performance as well. Monetary damages would be the difference between the amount due under the real estate contract and the fair market value of the property at the time of the breach.


There are other important considerations when deciding whether to breach a real estate agreement, from both a buyer’s and seller’s perspective.  Generally, there are several provisions which may allow a buyer to cancel a real estate contract under certain conditions, such as an inspection contingency, appraisal contingency, or financing contingency.  Perhaps the most important consideration is whether you may have to pay the other party’s attorneys fees.


If you ever are in a position where you feel compelled to breach a real estate contract, make sure you first reach out to Silverman Law Office, PLLC, to consider your options.


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