A real estate transaction has multiple steps when your lawyer may be providing services for you. The first instance is when negotiating the terms of the purchase agreement. Once a purchase agreement is executed, your attorney may assist you during the due diligence period prior to closing. Once the due diligence period has passed, your attorney will likely help you get the deal closed and finalized.
When one party refuses to close on a real estate transaction after a purchase agreement has been signed there are options for both parties. MN Statute 559.217 Subd. 1(b) gives each party rights when a cancellation of a residential purchase agreement is attempted. There are other potentially applicable statutes and common law principals that may apply if one party seeks to back out of a real estate purchase agreement. However, the terms of the actual purchase agreement generally are the most important place to look when a party attempts to back out of a purchase agreement, which makes negotiating the initial terms of the purchase agreement important.
A real estate purchase agreement usually contains multiple contingencies. Those contingencies are likely to impact each party’s right to insist on performance of a closing by the other party. If all of the purchase agreement’s contingencies have been met, the parties become obligated to fulfill their duties as buyer and seller, i.e. close of the purchase and sale transaction described in the purchase agreement. In the case of a seller refusing to complete the purchase by not selling, a buyer could begin a breach of contract lawsuit against the seller and ask a judge for monetary damages or request specific performance by the seller. Specific performance is defined as the performance of a contractual duty, as ordered in cases where monetary damages would not be an adequate remedy. A buyer generally has a right to request specific performance in a real estate transaction because the law views no two pieces of real estate as the same. Likewise, if a buyer refuses to buy the property from the seller, one option the seller has is to seek damages for the breach of the purchase agreement. The seller’s damages most commonly are calculated based on difference in price that the defaulting buyer was going to pay compared to the price the property is eventually sold for. Whether you are working on the initial drafting of a purchase agreement, or are experiencing issues with a party carrying through on their role in a purchase agreement, contact Ken Wasche to provide you with legal advice and options to make sure your interests are covered.