enforcing specific performance on a life estate

enforcing specific performance on a life estate

Austin, TX · Member since 2013 · 6 posts · 0 votes

Any advice on what to do would be greatly appreciated!

I'm wholesaling a property that is set to close this Friday 02/15/13.
Back in December the Independent Executor of Estate signed the Purchase and sale agreement. He has already signed the assignment of the contract and met with the buyer.

While getting the title information together, the underwriters are requiring that the Executor's son-in-law and step son sign at closing and agree to shared proceeds.

Here's the dilemma. The Executor and the son-in-law do not get along, and for weeks now, would not sign the proceeds agreement. They wanted the other person to sign off first. Neither one wanted to meet in person.

Now that it's the last week of closing, The Executor of Estate is not returning calls or emails. He isn't responding to the title company either.

The Son-in-law wants to sell, but has been told by other family members that the executor isn't going to sell but rent out the property instead. So he's waiting for the executor to agree to his 1/3 of the proceeds and then he will sign.

At this point If the executor doesn't show up to the closing, is there anything that can be done to enforce the sell of the property? Would the other 2 sellers that are required at closing be able to complete the transaction without him??

Would enforcing specific performance be something I would have to have the buyer initiate as a lawsuit if it came to it??

Any advice would be great.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    No legal advice.

    I came across a similar situation that I was not involved in a month ago.

    An older lady was selling her property as the executor and the proceeds were to be split between her and her child and her brother.

    The buyer wanted to close by a certain date. The brother of the seller at the last minute said he wasn't happy with the deal and wanted more money even though the estate and proceeds were set in stone.

    The lawyer for the seller got involved and send a compliance notice to the brother. The brother kept delaying and delaying the closing frustrating the buyer. Finally the sellers attorney sent a lawsuit notice to the brother of the seller and 5 weeks later from the original closing date it closed.

    I don't know how much you stand to make on this but getting an attorney to force the sale can be thousands if they blink. If they make you take them to court it can skyrocket. Sometimes a letter from an attorney will make them comply. If not you have a fight on your hands and the time and money involved might not be worth the effort.

  • Austin, TX · Member since 2013 · 6 posts · 0 votes
    13y

    Thanks, I would be making 10k assigning this contract. The Buyer is purchasing the contract at 400k which has an estimated 715k ARV. The catch here, is the Executor is actually a civil law attorney, and I'm starting to suspect he signed the agreement without intention to sell. If there would need to be a letter from an attorney, should that be something the Buyer should take care of? Since the contract has been assigned to him?

  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    You or the buyer or both might need to spend a few hundred total to get a real estate litigation attorney to review all of the documents.

    They can be realistic with you and give you the odds of specific enforcement and if it's worth your time and energy.

    There are laws and then life experiences the litigation attorney has about trying cases or suing etc. and how practical or pie in the sky it will be to win. With that kind of ARV spread there probably would be a big battle over this.

    No legal advice.

  • Austin, TX · Member since 2013 · 6 posts · 0 votes
    13y

    Thanks Joel for the suggestion, I understand completely that it cannot be taken as legal advice. The buyer is going to check with his attorney and see what can be done.

  • Investor · Pawleys Island, SC · Member since 2008 · 1k+ posts · 837 votes
    13y

    How is a life estate involved in your situation? Who has it and who actually owns the property once the life estate is terminated?

  • Austin, TX · Member since 2013 · 6 posts · 0 votes
    13y

    Well, the Independent executor of estate showed up on closing day this past Friday with a termination of contract form. The title company accepted that, so the deal is off.

    The break down of the family situation was a bit on the complicated side. Seems the executor of estate was using the "sale" of the house as a way to kick out their step son who was living on the property on the promise of getting some of the proceeds. The step son moved out a few weeks ago and was looking forward to the sale. However, the Executor terminated the contract.
    The step son asked me after the deal went south if someone could "buy his interest" in the property. I'm honestly not sure if that's even a possibility?

    The original home owner passed away and in her will & the probate case, it was declared her husband would be executor of estate. Subject to her husband's death the property would be divided between the deceased home owner's 2 children. One of the children has since passed away and left a husband and son. The executor of estate doesn't get along with the husband (son-in law). The title company's underwriters were requiring that the Executor of estate (Widow), his step son(actual son of the deceased), and Son-in-law sign off on the sale. The home owner/executor terminated the contract on the grounds that they did not want the husband(son-in-law) to get any of the proceeds.

  • Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
    13y

    Now this is just beginning to sound interesting. I'm not familiar with TX probate law however I know that in CA you can really mess things up pretty easily. Some possible plays:

    Force specific performance on the executor

    File petition to have PR removed and have someone else appointed that will cooperate

    Buy out the Son's interest. Structure the deal so that you are protected by only giving money upon signing, possession and receipt of marketable title or similar progressive event conditions required to release funds. Most assignment deals are black box or pig-in-a-poke situation and obscure to buyers, so be careful.

  • Austin, TX · Member since 2013 · 6 posts · 0 votes
    13y

    Interesting. Ya, the legalities involved have been over my head. I've been trying to read up as much as possible, but at this point it seems to be a waste of time to try to deal with their family drama.

    I checked out your website, closeprobate.com. Some good information on there. I am curious however on how someone would be able to buy out an heir's interest if the executor terminated the purchase and sale agreement?

  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    13y

    God LOVE complicated deals like this!

    A few random points

    An attorney can file a specific performance suit for a few hundred dollars. This immediately puts Lis pendens on the property and stops any sale of the house to any other party.

    The post title says life estate. So who is the remainderman? My understanding is the remainderman immediately owns the property upon death. If I understand correctly the PR can not even sell the property because it is not owned by the estate.

    IF (subject to the above) the PR has the authority to sell the property why would any title company accept a unilateral cancellation of contract?

    If the son or step son or whoever was living in the house has no rights to the house. Then just buy it out from under him and deal with getting him out of the property once you own it.

    Some of this is pretty basic stuff in my eyes. Who actually owns the house? If the is some kind of shared ownership who has agreed to the sale and under what terms? You haven't done a very good job of explaining some of these basic points so I wonder if you even know. If you don't step one is figure it out. Good luck - Ned

  • Austin, TX · Member since 2013 · 6 posts · 0 votes
    13y

    The situation is a bit complicated. The closing day has already passed with the PR having terminated the sale. The PR is an attorney and when the mention of specific performance was brought up, he said "Sure, I'd rather have a court tell me how to sell the property than a title company."

    So with that being said, the cash buyer I assigned the contract to is done with the transaction and moving on.

    The PR basically didn't want the son in law involved, but since the heir that was supposed to receive half of the estate subject to his death, already passed away. The title company was requesting the son-in-law sign at closing because he had life estate to his deceased wife's assets. At the end of the day, it seems more of an issue with the title company not doing their underwriting job properly and I will be using a different company next time.

    Thank you everyone for your suggestions and advice!

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