NASE Blogs

I am buying a home and the contract gives me the choice of either “specific performance” or “liquidated damages” if the seller defaults. I’m not really sure which one I should choose. Can you help?

Nov 16, 2014
Your question is a legal one and I encourage you to seek legal counsel before  signing a legally binding contract. However, I will attempt to answer your question on a broad basis. In a real estate sales contract liquidated damages usually represents a monetary settlement between the parties in the event either party does not perform all of the agreed upon terms of the contract, triggering a default. If a buyer defaults , the liquidated damages are most often deemed to be forfeiture to the seller of the earnest money in title escrow. If a seller defaults, the liquidated damages can be less clear unless an amount is specifically provided for in the contract. Specific performance requires a party to perform a specific act, usually what is stated in a contract. In a real estate sales contract, it is used to complete an agreed upon transaction, In other words, if the seller defaults the buyer can legally force the seller to sell the property. If the buyer defaults, the seller can force the buyer go through with the purchase of the property. Since each situation is unique and laws vary by state your attorney is best suited to help you make the right decision.