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Webster's dictionary defines a contract as, "a binding agreement between two or more persons or parties"

The key word within this definition is "binding". When someone breaks a contract, they are breaking a legally binding agreement, and subjecting themselves to possible legal action. Contracts are put into place to protect the interests of the parties involved. All of the parties involved. Breaking a contract can lead to serious consequences, and should be avoided at all costs.

A real estate contract can cover a variety of different issues. Landlords use contracts for rental agreements, home sellers sign a contract with a broker to sell their home, and home buyers sign a contract to purchase a home. A breach of any of these contracts can lead to legal action, and serious financial hardships.

Breaking a real estate contract can have multiple consequences, such as:

1. Lawsuit;
2. Being ordered to perform to the contract;
3. Covering court costs;
4. Moral consequences.

The most serious consequence of breaking a real estate contract is being taken to court and sued. A court can order a party to "perform" the duties of their contract. If this is the case, the party will most likely also be ordered to pay legal fees and court costs. This can make for an expensive process.

For a tenant, if you feel that you are justified in breaking a contract, it is best to consult with a real estate attorney to seek out the best way to handle the situation. If you break a lease early, you can be ordered to pay the balance of your rent for the duration of the lease. For example, if your rent is $1000 a month and you leave 10 months early, you can be sued for $10,000, the balance of the rent you would have paid.

If you are a home seller, and you want out of your listing agreement with your broker, the best thing to do is discuss this with the managing broker. Many times, the broker will agree to let sellers out of their contract early if they desire. If not, they can maintain the rights to market and sell the property until the contract is expired, or you may be ordered to reimburse all incurred fees to the broker. This can be advertising expenses and other fees they took on.

If you feel the broker has not performed as they promised, or their end of the contract was not upheld, then a seller is justified in wanting out of the contract. A release can then be signed by all parties, releasing everyone involved of any liability.

Home buyers are also subject to contracts when purchasing a home.

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