Chatham County Real Estate Agent Eric Andrews explains what a Seller’s Breach is. One of the most common causes of a seller’s breach is when there is an encroachment on the property. Another seller’s breach is when a significant omission which was not revealed to the buyer. Another example would be when the seller does not have a clear title. Sometimes a seller does not disclose things to the buyer which puts them in breach. Many breach issues may be resolved. In the event they’re not resolved, sellers will usually need to reimburse the potential buyer for their due diligence money and other expenses.
Speaker 1: What is a seller’s breach?
Speaker 2: So you have buyers and sellers that are under contract, and the seller doesn’t have the ability to sell the property, or there’s been some kind of significant omission that has been made that wasn’t revealed to the buyer. I’m not an attorney, but just as a real estate agent, the reason why seller’s breach is so important is because there’s due diligence money that the buyer gives to the seller, and then there are many, many other expenses that the buyer is going through. So the buyer’s paying for a well inspection, a septic inspection, a wood-destroying insect inspection, a home inspection, an appraisal, a title search. You can easily get up to $2000, $3000, $4000 worth of fees. A survey, okay? If the seller doesn’t have clear title they can’t convey, they can’t consummate the contract, then all those expenses that the buyer had are the legal responsibility of the seller, so we don’t want the seller to be in breach.
We had an incident recently where there was a roommates agreement and an amount of money was assessed, and that seller didn’t disclose that to the buyer. Well, is that a breach of contract? That might not meet the definition of breach, but it is certainly something that the buyer wasn’t aware of, so they could contend, “You didn’t make me aware of these fees, therefore, I’m not going to buy now, and you’re responsible for my other fees.” One of the most common ones is a survey. So the seller has a piece of property, the buyer gets a survey, and we find out there’s some kind of encroachment.
The neighbor has built the barn over the property line, or the seller’s outbuilding goes over a line, or sometimes it’s just a setback violation. But the fact of the matter is, the seller said that they had good, clear title. They had something that they could convey, and this encroachment now is an issue and they don’t have clear title, so the seller is in breach until they remedy that situation. That’s not even a due diligence request. That’s not like, “Oh, we would like you to fix this.” This seller has to fix that to be able to convey good title.
The other thing that kind of happens an awful lot is divorce in North Carolina can be an issue. North Carolina will have people that are separated for 10 years and they don’t get a divorce, or they get a divorce and not everything was completely taken care of in the divorce agreement regarding another piece of property, or whatever. So an attorney might find that the change of marital status, or not having the divorce finalized or detailed or whatever, the other spouse might have to sign the deed. If that spouse isn’t willing to sign that deed, then the seller is in breach and they can’t convey their title, so it’s a big deal if a seller is in breach.