Real Estate Contract Specific Performance

by Steve Lander
A specific performance judgment forces the seller to sell.

Real estate contracts are binding legal documents. Once a seller and buyer sign it, they are obligated to close the property unless they take advantage of any contingencies or other clauses that allow them to cancel. Since sellers typically get few, if any, reasons to legally cancel the contract, a refusal to sell is usually a breach of contract. When this happens, the buyer can sue for specific performance to try to compel a sale.

Why Sellers Breach

Sellers can have many reasons to breach their purchase contract by refusing to sell. In some cases, a higher offer comes in that the seller wants to accept. In others, the seller's purchase of a replacement property or financing for her replacement property could have fallen through, leaving her not having a place to go. In others, the seller simply changes her mind. Regardless of the reason, unless the contract gives the seller a specific right to cancel, any of these reasons are still breaches of the contract.

Specific Performance Orders

Once a seller refuses to sell, the buyer has the right to file suit to seek an injunction for specific performance. Assuming that the buyer wins the lawsuit and has fulfilled all of her obligations under the contract, the court will force the seller to go forward with the sale. Along with filing the suit for specific performance, most buyers also file a "lis pendens" order against the property. The lis pendens lets anyone that looks at the property's title know that a lawsuit is pending. This essentially makes the property impossible to sell to anyone else since its title cannot be insured.

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Specific Performance Costs

When you sue for specific performance, you will have to hire an attorney and eventually go to court. While you can include damages as a part of your lawsuit, you can nevertheless expect to spend thousands of dollars before you ever get to a point where you can collect those damages. In addition, specific performance lawsuits don't usually happen overnight. It's not uncommon for the suit to take years to be resolved. During that time, you won't have ownership of the property, but you may need to remain ready, willing and able to buy it.

Suing the Buyer

It's also possible for a seller to sue a buyer for specific performance if the buyer backs out of the contract. However, these suits are relatively rare since it's hard to compel someone to buy a property if he doesn't have the money. Also, if your contract has a "liquidated damages" clause, you can keep the buyer's deposit in lieu of suing him if he breaches the contract.

About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

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