Navigating Specific Performance When a Buyer or Seller Refuses to Close Escrow

Specific performance represents a critical remedy in real estate transactions when a party refuses to complete a purchase agreement. It compels the breaching party to follow through on the sale by court order. Given the property’s unique nature, monetary damages often cannot adequately compensate the non-breaching party. Therefore, understanding conditions around specific performance empowers buyers and sellers to take informed action during disputes. This blog examines many considerations, requirements, and defensive strategies regarding specific performance in real estate deals that have gone sour.

Understanding Specific Performance in Real Estate

Specific performance is a complicated issue requiring the completion of a real estate contract’s terms by the party refusing to close escrow. With the property’s inherent uniqueness and personal value, monetary damages may provide insufficient compensation for a breach of a purchase agreement. However, limited reasons like misrepresentation or hardship may be challenging because a seller may be prevented from their ability to complete the deal.

Conditions for Seeking Specific Performance

Sellers can justifiably refuse to follow through on a real estate contract only under specific grounds. These include mutual mistakes, misrepresentation, duress, or wrongdoing during signing. To avoid the failure of contract claims, sellers must carefully document any additional time or purchase concessions with signed addendums. Buyers should likewise amend agreements to reflect adjustments and a willingness to close throughout negotiations.

Initiating a Specific Performance Lawsuit

To sue for specific performance, the innocent party first records a Lis Pendens on the property and then files a lawsuit requesting the completion of sale terms. However, demand letters and mediation provide faster, lower-cost options that should come first. Lawsuits prove expensive, stressful, and time-consuming. Still, legal action becomes necessary when you have difficult parties. Plaintiffs must prove valid contracts and their readiness to close

Requirements to Win a Specific Performance Lawsuit

Three elements determine success in a specific performance claim:

1) A valid, enforceable contract exists.

2) The buyer proves readiness and willingness to fulfill all contract terms. 3) The seller refuses to complete the sale without legal grounds.

Defense Strategies Against Specific Performance

If facing a claim for specific performance, several defenses exist, along with other claims. Instances of misrepresented property condition, mistake or ambiguity of terms, extraordinary hardship, bad faith negotiations, or a buyer’s ability to close could bar enforcement or cancel the contract outright.

What to Do If a Seller Refuses to Sell (Buyer’s Case)

When sellers back out after initially agreeing to sell, buyers have recourse like demand letters, mediation, and specific performance lawsuits. To strengthen their case, buyers should document contract authenticity, acceptance of sale terms, timely inspection completion, and readiness to close throughout negotiations. Records prove the buyer maintained all purchasing duties without delays. Before a lawsuit, buyers should send sellers demand letters and attempt mediation opportunities requiring the sale’s completion.

What to Do If a Buyer Gets Cold Feet (Seller’s Case)

Sellers facing buyers with cold feet must start by examining if the purchase contract provides any outs or cancellation provisions. If no legitamate exits can be discovered, sellers can demand the buyer’s close escrow as originally agreed, potentially through progressively aggressive demand letters or mediation before suing. Any initial flexibility in delaying closing should come with amended terms in signed writing.

Complexities Around Agent Performance

Real estate deals stalled by a refusal to close often involve poor agent guidance, especially regarding disclosures. Both buyers and sellers should question their agent’s efforts in facilitating negotiations. Be sure to have your lawyer on the speed dial in this matter.

Contact Segal Commercial

As critical assets are sold, real estate deals depend on good faith follow-through from buyers and sellers. When one party abandons their duties, careful navigation of fair remedies like specific performance and sound documentation of events protects innocent players. By arming themselves with a good lawyer, those impacted by refusal to close can turn breakdowns into breakthroughs.

Has a buyer or seller recently left your real estate transaction in limbo by refusing to close? Contact Lee Segal at Segal Commercial Properties, a full-service commercial brokerage representing clients across Los Angeles County. With deep knowledge of real estate contracts, Lee can carefully examine your purchase agreement, demand compliance from the breaching party, and coordinate specific performance proceedings for smooth closure.

Disclaimer: The content provided in this blog is intended for informational and educational purposes only. Nothing in this blog should be construed as legal advice or be used as a substitute for professional advice. The opinions expressed herein are solely those of the author and do not represent the views or opinions of any organization or entity that the author may be affiliated with. In no event shall the author be held liable for any actions taken based on the information provided. Any use of this blog in a court of law or in legal proceedings is expressly disallowed.

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