The standard form contract used by Realtors, the FAR-8 as it is known to Realtors, does not even remotely protect the interest of a Seller, in most cases. In the event of breach, the remedies section of the form calls for the non-defaulting party to either recover the earnest money deposit, or require specific performance of the contract. An old and controlling legal maxim is that when any matter is specifically mentioned in a contract, matters not mentioned are deemed intentionally omitted and therefore unavailable. Therefore, normally a court will not grant damages to a non-breaching party in the standard FAR-8 contract, since the form expressly lists only specific performance.
There is an exception to that general rule where one party enters into the contract without a good faith intention to perform it, or breaches without a good faith effort to perform. However, that is an exception to the rule, anddoes require evidence of lack of good faith.
The problem normally caused by the standard FAR-8 contract is that it is difficult to force a Buyer to perform, because a Buyer can easily put himself in a position in which he cannot qualify for a loan, and a court cannot force a mortgage company to make a loan which it does not choose to make. In addition , a Seller often cannot wait several months for an arbitrator to decide whether or not to order specific performance, and the property must be kept off the market during the interim. The result of the standard FAR-8 form is that a Seller=s only practical remedy is to retain the earnest money deposit. The EMD may be only a fraction of the Seller=s actual losses, especially if the Seller has pulled the property from the market in expectation of closing, or has moved from a house or otherwise changed this position in reliance upon the expected closing.
Realtors often consider themselves to be transaction brokers, therefore neither party is their client, and that therefore they owe no fiduciary duty to anyone in the transaction. The theory, therefore, is that Realtors owe no legal duty to advise the Seller that the remedy in the contract offers him no protection. Even if that is true, and I have seen recent lawsuits that may put a different light on that issue, a listing agent who permits a Seller to sign such a contract will lose the confidence of his client if the deal does not close, and, because of this poor contract, the Seller has no remedy.
Since an amendment at the time the contract is made would call attention to the remedies section of the contract at the very time Realtors are interested in putting the deal together, most Realtors don't want an amendment to be attached to the offer that adds to the remedies for breach. Therefore, I think the form should be changed without delay. Until the form is changed, I don't recommend any Seller to sign the standard FAR form without an amendment providing for the availability of damages as an additional remedy.