Considering filing for 'Specific Performance' - Seller backs away

Considering filing for 'Specific Performance' - Seller backs away

Real Estate Investor · Plano, TX · Member since 2017 · 19 posts · 1 vote

Hi Pros,

I can use your guidance here.

I have scenario where buyer signed a contract to purchase a piece of land here in Texas held by a trust. Contract is using standard 'TREC Unimproved Property Contract' with seller responsible to provide survey and pay for title / commitment. There were two installments of earnest money that were both paid by the buyer on-time. As closing date  (originally May 2) approached, seller was not providing original trust that was required by title company to issue the title commitment. Before closing, survey was performed (paid by buyer; but seller is responsible for the cost) and it identified that there was encroachment by neighbor. Buyer raised the objection for boundary issue to be resolved a day before closing date; so per contract language, closing date gets extended for 14 days for seller to cure the objection. In first week of May, seller provided the title company original trust and agrees to extend the closing date to May 15. Even though there was objection on boundary issue, buyer is open to idea of closing on property as long as title commitment can be issued with exception. Title company responded that it's not able to get anyone to issue title commitment and returned the earnest money to buyer. So that is where things are now.

Buyer is still interested to close the property and asking seller to take contract to different title company and execute. Buyer has incurred about $5000 (survey and other due diligence related cost). Now seller is not cooperating or responding to any of buyer attempt and kind of walking away from the contract.

Buyer is considering to file for 'specific performance' so seller complies with contract. Is this a case that typically good chance for buyer to:

A. Force the sale of the property.    AND/OR

B. Force seller to pay for the monetary damages / expenses incurred by buyer and any related attorney charges for covering 'specific performance' case.

Many thanks.

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Greg H.Pro Member
Moderator
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
4y

So for the earnest money to be refunded, the contract was terminated and an earnest money release was signed by both parties.  As of that point, there is no contract for one to enforce the seller to perform

The seller has no further obligation to sell the property under the original terms or execute a new contract and take it to another title company

The buyer can always pursue damages for the cost of the survey in small claims.  The wording of the original agreement would determine the outcome

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    4y

    So for the earnest money to be refunded, the contract was terminated and an earnest money release was signed by both parties.  As of that point, there is no contract for one to enforce the seller to perform

    The seller has no further obligation to sell the property under the original terms or execute a new contract and take it to another title company

    The buyer can always pursue damages for the cost of the survey in small claims.  The wording of the original agreement would determine the outcome

  • Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    4y

    @Shahid Iqbal Buyer was not able to deliver clear title due to the encroachment issue, within the contract date.....so the contract is terminated. You chose to pay for the survey, so you likely can not force the sellers to pay for it.

  • Ronald RohdePro Member
    Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
    4y

    You must have receiving something from seller/title, do you have copies of a notice of termination?

  • Real Estate Investor · Plano, TX · Member since 2017 · 19 posts · 1 vote
    4y
    Quote from @Ronald Rohde:

    You must have receiving something from seller/title, do you have copies of a notice of termination?

    No notice of termination from seller. Title company refunded the earnest money stating that they are not able to get title commitment. Seller offered to just to do warranty deed transfer only, that I declined. 
    as it was discussed over text messages if current title company not able to close,  we will try different title company. 

    That's where things stand as of now.

  • Real Estate Investor · Plano, TX · Member since 2017 · 19 posts · 1 vote
    4y
    Quote from @Wayne Brooks:

    @Shahid Iqbal Buyer was not able to deliver clear title due to the encroachment issue, within the contract date.....so the contract is terminated. You chose to pay for the survey, so you likely can not force the sellers to pay for it.


     Buyer? It was seller responsibility to pay for title commitment/issue title commitment. Along with any shortages to be adjusted at seller cost.

  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    4y
    Quote from @Shahid Iqbal:
    Quote from @Ronald Rohde:

    You must have receiving something from seller/title, do you have copies of a notice of termination?

    No notice of termination from seller. Title company refunded the earnest money stating that they are not able to get title commitment. Seller offered to just to do warranty deed transfer only, that I declined. 
    as it was discussed over text messages if current title company not able to close,  we will try different title company. 

    That's where things stand as of now.

    You are missing something here as a title company would not just release the earnest money at this point without a release signed by both parties. Like I said, a claim for the cost of the survey would depend on the wording of the contract which we are not privy to
  • Real Estate Investor · Plano, TX · Member since 2017 · 19 posts · 1 vote
    4y
    Quote from @Greg H.:
    You are missing something here as a title company would not just release the earnest money at this point without a release signed by both parties. Like I said, a claim for the cost of the survey would depend on the wording of the contract which we are not privy to

    Thanks Greg. To answer your question: 

    On survey: Initially there was standard survey terms per standard contract with seller to pay for the title. And standard terms, you are right, contingent on closing. Later amendment was signed with remarks as: 'A new survey will be ordered for which seller will be responsible to pay up to $2000.' This survey was ordered / paid by buyer. 

    On earnest money, as closing date passed and seller was still not providing trust agreement (and only was willing to providing trust certificate that was not acceptable by title company). Seller sent e-mail to title company to release earnest money. That buyer did not accept and asked for seller for contract conformance. Seller later provided original trust but title company was still not able to secure commitment (due to encroachment). At that point, earnest money was released to buyer without any further letter / notice from seller or buyer.

  • Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes
    4y

    1. If the title company released earnest money without all parties agreeing, the buyer's issue is now with the title company. The title company doesn't get to unilaterally decide when a contract is terminated and earnest money is released absent the necessary documentation of such. Para. 18(C) explains how the funds are to be released, and since the title company has a fiduciary role, you should take up the matter with them as it sounds as though they didn't follow the terms of the contract for release of earnest money. 

    2. An encroachment does not prevent a title policy from being issued...the underwriter will just "except" it from coverage since the seller presumable cannot cure any objection to the encroachment. 

    Bottom line is that your beef is with the title company now. 

  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    So the seller may owe the buyer $2000 for the survey. Seems simple.

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