$1.2M Jury Verdict: Seller Backed Out of Home Sale at Escrow

Our clients signed a contract to buy a home. They put work into the property and its value went up. Then, on the morning escrow was set to close, the seller tried to cancel the deal. A jury didn’t let her walk away. It awarded our clients $800,000 in damages and $400,000 in punitive damages, a $1,200,000 verdict. Add about $260,000 in prejudgment interest and roughly $100,000 in costs, and the total comes to about $1.6 million.

The Result at a Glance

• Jury verdict: $1,200,000 ($800,000 compensatory plus $400,000 punitive)
• Total value with interest and costs: about $1,600,000
• Case type: Breach of a residential real estate purchase contract
• Trial team: Khashayar Law Group with co-counsel LOKK Legal
• Announced: February 9, 2026

What Happened

The deal was simple on paper. Our clients agreed to buy the seller’s home. Before closing, improvements our clients completed raised the home’s value. With a more valuable house and escrow about to close, the seller tried to back out that morning.

That’s a pattern we see when a market moves or a property gains value mid-deal. A seller decides the signed price is no longer good enough and looks for a way out. A contract doesn’t work that way.

Why the Jury Added $400,000 in Punitive Damages

Punitive damages are rare in a contract dispute. California doesn’t allow them for a broken contract alone. Under Civil Code §3294, a jury can award them only when it finds, by clear and convincing evidence, that the defendant acted with malice, oppression or fraud.

So the $400,000 says something. This jury saw more than a seller who changed her mind. Punitive damages exist to punish that kind of conduct and to keep it from happening to the next buyer.

Where the Extra $360,000 Comes From

A verdict isn’t the final number. California lets a winning party recover prejudgment interest on contract damages that were certain or capable of being made certain (Civil Code §3287). For contract claims the rate is 10% a year (Civil Code §3289). Here that came to about $260,000. The prevailing party also recovers its allowable court costs (Code of Civil Procedure §1032), about $100,000 in this case.

If a Seller Backs Out of Escrow in California

• You can ask a court to force the sale. California law presumes money can’t fully replace a specific piece of real property (Civil Code §3387). For a single-family home the buyer plans to live in, that presumption is conclusive. This remedy is called specific performance.
• Or you can sue for damages, including the difference between the contract price and the home’s value (Civil Code §3306).
• Record a lis pendens once a lawsuit is filed, so the seller can’t quietly sell to someone else (Code of Civil Procedure §405.20).
• Read the purchase agreement first. Most California residential contracts require mediation before a lawsuit. A party who skips it can lose the right to recover attorney fees.

Frequently Asked Questions

Can a seller cancel a home sale on the day of closing?

Not without a valid contractual reason, such as a contingency that wasn’t met. A seller who simply changes their mind is in breach, and the buyer can sue to force the sale or for damages.

Can you get punitive damages for breach of contract in California?

Not for the breach alone. Punitive damages require clear and convincing evidence of malice, oppression or fraud under Civil Code §3294. That’s what made the $400,000 punitive award in this case significant.

What is prejudgment interest?

Interest on damages from the date they were owed until judgment. On contract damages in California it accrues at 10% a year, which added about $260,000 here.

Buying or Selling Real Estate in San Diego?

Read about our real estate purchase and sale practice and our contract dispute work, or see our $1.25M title insurance recovery. Associate attorney Angela Ness focuses on real estate transactions and disputes. Call (858) 509-1550 for a free consultation.

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Case results disclosure: Past results do not guarantee or predict future outcomes. Every case depends on its own facts. This page is general information, not legal advice.