If the seller walks away from a real estate transaction, can I recover my due diligence expenses?
Transactional attorney, Hannah Kitz states, “That depends on the terms of the purchase and sale agreement (“PSA”). Typically, the answer is “no”- under most real estate broker form PSAs, the buyer’s recourse is limited to a refund of the earnest money.
However, a buyer can negotiate a provision in the PSA to require the seller to reimburse out-of-pocket costs for due diligence if the seller defaults. In this case you could recover amounts paid for inspections and environmental assessments, title-related expenses, deposits paid to funding partners, and legal fees.
Every buyer knows that due diligence investigations are often expensive, but they are always necessary. How else would you learn that a contaminated groundwater plume lurks beneath the surface, or that the property next door has a free right to use your parking lot for music festivals every Friday?
Instead of saving costs by curtailing property investigations, consult with a real estate attorney to understand your options and protect your wallet.”
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