What does it mean for a buyer to default?

Asked by Icemerson01, Battle Creek, MI Mon Nov 14, 2011

My husband and I were going to build a new home in a subdivision in our area. We signed papers in June stating that in March we would have the down payment and we could begin construction at this time. We put a $500 on the lot of our choice. We stumbled upon a home we love and makes more sense financially for us to purchase. We notified the builder of our decision NOT to build with them and they said that we may owe them a $5,000 fine for working with another realtor and they reference a section in our agreement. This section mentions nothing about another realtor, only that is we were to default....I am confused as to why we pay the $5,000 if the agreement mentions nothing of another realtor....so my questions is, what does it mean for a buyer to default under these circumstances?

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Brad Manning, Agent, Fallbrook, CA
Mon Nov 14, 2011
The simple answer regarding the meaning of the word default in regards to contract law is that the buyer has failed to meet their obligations within the mutually agreed to contract.
Now, in regards to your specific issue. Since you have signed "papers" which I assume are a contract of some type, the specific explanation of "Default" under that contract should be written somewhere in the agreement.
If your potential losses are simply the $500.00, you may want to simply forfeit that amont in order to "Walk Away". However, if the agreement does allow the builder the potential to seek further damages as you mentioned of up to $5000.00. you may want to spend a few hundred dollars in order to discuss the matter with a real estate attorney.
0 votes
, ,
Mon Nov 14, 2011
“We signed papers” probably means you signed a purchase contract. Default means you did not meet your side of the mutual promises in the contract. The builder held a lot for you and counted it sold. Most of the time parties try to handle conversations like this over the phone, better if you visit personally with the builder and try to reach an understanding. They knew they had a shaky deal because you did not have the required funds when you signed the contract.

Info on Rent to Own:
http://www.trulia.com/blog/jimsimms/2011/11/rent_option_or_r…

Credit Repair can be a Crime:
http://www.trulia.com/blog/jimsimms/2011/10/credit_repair_ca…

Down Payment Assistance in Kentucky:
http://www.trulia.com/blog/jimsimms/2011/03/down_payment_ass…

http://www.trulia.com/blog/jimsimms/
0 votes
Christopher…, Agent, Tarrytown, NY
Mon Nov 14, 2011
Hi, See if there is any fine print describing what they define as "default", the contract should absolutely have it. Otherwise you may want to have an attorney look it over and tell you what your next move should be.

Christopher Pagli
Licensed Associate Broker
Accredited Buyer Representative
GREEN Designated Agent
William Raveis Legends Realty Group
914.406.9023
0 votes
Tim Moore, Agent, Kitty Hawk, NC
Mon Nov 14, 2011
I would say your builder is trying to blow smoke up your A$$. Did you sign anything? I would need to see that to see what you agreed to. It would seem to me you might loose the $500, if you gave it directly to the builder rather than an agent who would put it in an escrow account, then you probably won't easily get that back. I don't see any other damage the builder could site. It concerns me a little when you say "use another Realtor". Does that mean the builder is also a Realtor?
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