An agreement of purchase and sale is a binding contract. However, in many instances, a purchaser may be unable to close on the agreement and will be forced to default. These reasons may include lack of financing, or falling market prices that it had not accounted for.
When a buyer fails to close, they are then responsible for making the seller “whole”. The buyer, in many cases, will also be required to forfeit their deposit, regardless of whether the vendor has suffered any damages. This is meant to compensate the seller for the lost opportunity, and loss in bargaining power at having already revealed the market price. Where the seller did suffer a loss, the deposit would be treated as part of the payment of damages suffered.
However, entitlement to the deposit is not automatic. It is held in trust by the brokerage. Forfeiture is subject to equitable relief such that the buyer can be let out if the amount would be out of proportion to the damages suffered, and if it would be unconscionable for the seller to keep it.
As best practice, it is recommended you relist the property upon your buyer’s default, as there is a duty on sellers to mitigate losses.
Our firm has experience in dealing with these matters, and we can assist you in litigation.