All Forum Posts by: Ryan S.

I definitely see what you’re saying about the seller backing out being a violation of your good faith agreement, and what is the point of a contract if the seller can just change their mind… However in my experience most people do end up settling for monetary damages incurred rather than trying to force the sale.

I have seen two cases where it went the distance and the buyers successfully sued for specific performance. The first was a $10M historic property in Downtown Denver that was truly unique due to its location and age. There are no other properties like it. The buyer had performed at closing, delivered funds to the title company, signed closing docs and everything. Seller decided to back out at the last moment for some arbitrary reason and just didn’t show up to closing to sign the docs. Closing funds were held in escrow, buyer decided to sue for SP. Eventually after about 3.5 years the buyer did prevail. I’m not sure who paid legal fees but they must have been significant.

 The second case was a commercial property (an 8 unit multifamily in a complex of 6 individual 8 unit buildings), owned by a group of investors. A developer had already worked out deals with the owners of the other 5 buildings and finally got the 6th and final building under contract. Some of the owners had wanted to sell and others didn’t. I believe the owners with the majority ownership share forced the others to sell, but they weren’t cooperating. They all had their own lawyers of course and it was a mess that took 3 years but eventually the buyer (the developer) did prevail. I think the key in that case was that the property was the last one needed in a large development of a group of blighted small MF buildings that were to be torn down and redeveloped. The building was vacant and completely rundown with the windows all smashed out by the end of the lawsuit. The owners were essentially slumlords. The buyers had invested a lot into the deal (~$100M) and purchasing the property was critical to complete their development.

In almost every case involving vanilla SFH's that I've been privy to, buyer and seller have settled during mediation for monetary damages. In a few cases the buyer has moved forward trying to sue for specific performance but eventually gave up after about a year and around $30k spent on legal fees.

The gamble is that the outcome hinges upon the courts discretion and it's rare to see specific performance unless buyer can demonstrate that monetary damages aren't enough to make them whole. As an investor looking to purchase an STR in a ski town, I'm not sure I'd feel that confident in a court deciding in my favor, personally. Seller might claim that the contract wasn't fair and equitable to begin with, or use stalling tactics, or they might say they need to move into the property because they are getting divorced/ lost their job/ need to move their ailing mother into the property, etc. and anything along those lines might make a judge more sympathetic to them than an investor buyer looking to turn the property into an STR.

I’m also not quite convinced that the property is unique enough to justify specific performance because it is typically only enforced when there is a lack of other remedies such as monetary damages. For example the property being historical or a critical part of a large development plan. You could probably just go buy a different investment property and achieve the same returns. So that will be a tricky element to this IMO. 

But I get where you’re coming from, it’s super lame when a seller backs out. Keep us posted on what your lawyer says if you can, let us know how it goes, and good luck. 

 Then it sounds like you have a good case but just be cautioned that plenty of good cases end up big losers in court. Don't convince yourself that because you are in the right you will be victorious in a legal sense. Convince yourself that there's a better than average chance that you will lose, and if you can live with the time, energy and money spent if you do. 

I can't possibly imagine what kind of townhouse could be worth all of that aggravation and cost. I don't know if you have ever been sued, or sued anyone, but I have and in court *nothing* is clear cut, including recovery of legal fees, which is why everything can be appealed and often is. As Jay said this kind of litigation can drag on for years before being resolved. Just the fact that it's a townhome means there's 1 or 5 or 50 just like it, so I can't picture what could be so unique about it unless the OP is fleecing the seller and he knows it, and the seller has just realized that which is why he doesn't want to sell. If that's the case I would not at all be assured of a court victory. 

Good that you used the state form. So yeah Jay is right (as usual), first step is mediation. Unfortunately enforcing specific performance on a seller is a rare remedy, as most often compensating the buyer for any monetary damages they have incurred is seen as an adequate remedy. I'm not sure that the property being perfect for your investment criteria makes it unique enough to warrant a judge forcing the sale, especially considering that it was not listed for sale to begin with and that you're going to be using it for an investment property not a primary residence. STR investors aren't really looked at that favorably in our mountain communities these days, putting it lightly. Seems like an uphill battle and as Jay pointed out it would be a long, expensive process that tends to favor the seller (judges don't take forcing people to sell their property lightly). I'd hazard to guess that you'd end up settling for monetary damages in the end, which being only a week into the contract you wouldn't have that many. Good luck though, I definitely see why this is frustrating for you! Maybe through mediation you can get some more money out of the seller for your troubles.

If I was in this situation I would hire an attorney and going forward follow the contract to the letter, documenting each breach but also clearly demonstrating readiness to close on the settlement date.

And yes, I would have the lawsuit and lis pendens ready for filing before that date passes.

"I changed my mind" is not a defense and if the seller truly put that in writing and OP doesn't otherwise bungle this by missing a deadline, etc., I sense this could be a winner. Getting that won't be cheap but apparently neither is this investment.

Did you use the state-approved contract/ a contract that addresses the remedy for breach of contract and specific performance? 

 The issue is not the contract, the issue is going to be enforcing the contract, the individual who was selling this could hold this up for years and cost you tens of thousands in legal fees, and then they file bankruptcy and stall it another 5 years. They also could have a mortgage that could not be satisfied by the price and in that instance, again the bank would not release it - so again stuck. 

Again while they may legally be bound to an agreement, you are going to have to go through the court system to get them to abide by it, and that is not going to be easy or cheap.

What makes the property unique and why can't you find a different property that meets your needs? The reason I ask is that specific performance is rarely granted as a remedy in my experience (not a lawyer, just do some transactions) unless a monetary reward isn't enough to make the buyer whole because the buyer truly can't find a different property to meet their needs. From what I have seen, the typical remedy is termination of the contract, refund of the EM deposit and all expenses incurred by the buyer during the failed transaction. Could be an uphill battle but good luck. 

 Tom's link is excellent. Yes, you could do so, but it doesn't sound like you did anything on your end. Did you acquire the funds? Do you have proof of loan approval? Did you follow or attempt to follow everything on your end such as inspections, etc and were stymied? If not, you will have a steep burden to prove you were able to actually fulfill your end of the contract and have a court order the completion of a sale. 

I would take the money they offer and move on.

@Ryan S. This is purely a state law issue. You're going to want to review the case below and any that have expanded upon the issues cited within it since.

https://law.justia.com/cases/colorado/court-of-appeals/2003/...

Good luck.