What are the consequences of breaking a memorandum of agreement?
Since a memorandum of agreement is non-binding, there are generally no legal consequences for breaking one. However, backing out of an accepted offer can cost money.
That’s because the buyer pays out of pocket for a home inspection typically before a contract is signed, during the due diligence phase. There may be other sunk costs as well. For example, the buyer’s attorney may have paid for a title search during the due diligence and contract negotiation phase.
There are social costs as well for both agents and principals for breaking a memorandum of agreement. The parties backing out of an accepted offer may be viewed as not being serious buyers, or even unprofessional by their counter-parties.
In a similar vein, the agent may view his or her own client as not being serious about buying or selling if the customer keeps backing out of accepted offers.