I'll always remember the first night I spent in my new home. I didn't get much sleep because I was worrying about how I'd be able to afford the mortgage payments, plus the property taxes, insurance and all the other bills already adding up.

In the real estate business, I had what is known as a bad case of buyer's remorse. It often strikes home buyers shortly after they make a purchase offer. Mine didn't strike until I had moved into the house and realized my expenses would be much higher than they'd been in my previous home. I even had visions of filing bankruptcy, ruining my credit and being thrown out of the house in disgrace by the mortgage lender.

But then I reasoned that I liked the house, the lender wouldn't have loaned me 80 percent of the purchase price if he didn't think I could afford the payments, and the chances of losing the house by foreclosure were practically nil. Nineteen years later, I look back and laugh at myself for letting buyer's remorse get me down.

Remedies for buyer's remorse
Sooner or later, most real estate agents encounter buyers with a serious case of buyer's remorse. It can strike anytime between making the purchase offer and moving in.

Smart real estate agents counsel their buyers on all the advantages of buying the house, emphasizing its features and how much the buyer will enjoy living there. However, if the buyer revokes the purchase offer before the seller accepts it, there isn't much the agent can do.

When buyer's remorse strikes while the sale is pending, usually while the professional inspection and financing contingencies are being removed, the realty agent's job is not easy. Unless the buyer has a valid reason for backing out, such as the inspector's discovery of undisclosed defects, the buyer could be liable to the seller and the realty agent for damages.

If the buyer can't qualify for a mortgage and the purchase offer contained a financing contingency clause, then the buyer has a valid reason for canceling the sale. Otherwise, the buyer becomes liable to the seller for damages if the house later sells for less to another buyer. In rare cases, where there aren't any other buyers for the property, the seller could sue the buyer for specific performance of the sales contract to force a purchase.

This happened in the leading case of B.D. Inns v. Pooley, 218 Cal.App.3d 289, where the seller built an 840-unit hotel to the buyer's specifications. The court said monetary damages were inadequate to compensate the seller for the buyer's sale cancellation, so the buyer was ordered to complete the purchase.

In the opposite situation, where the home seller decides not to sell or demands a change of terms (usually more money), if the realty agent can't talk some sense into the defaulting seller, the buyer's most powerful remedy is legal action. Buyers often sue defaulting home sellers for specific performance of the sales contract. Such a lawsuit, when successful, orders the seller to deliver the deed as agreed.

To prevent the seller from selling to another buyer, a 'lis pendens' is usually recorded against the home's title. This document warns any buyer or lender dealing with the property that litigation is pending.

If the remedies above prove ineffective, there are other possibilities for disappointed home buyers and sellers.

When the home buyer can prove intentional fraud by the seller or the real estate agent, also known as deceit, the buyer can sue for monetary damages plus punitive damages to punish the wrongdoer.

If the buyer defaulted on the purchase, and the contract contained a "liquidated damages clause," the buyer may have to pay the agreed damages stated for breach of contract.

Additional possible legal remedies include: arbitration or mediation of the dispute; an injunction to prohibit or compel a specific action; or a declaratory judgment by the court to determine the legal rights of the buyer and seller. For further details, please consult a local real estate attorney.