Specific Performance Demands In Real Estate Transactions
Below is a MRR and PLR article in category Finance -> subcategory Real Estate.
Understanding Specific Performance in Real Estate Transactions
In the world of real estate, transactions don’t always go as planned. Sometimes this results in one party demanding that the other fulfill their obligations as per the real estate contract.
The Basics of Real Estate Contracts
When a seller and buyer agree on a property price, a legally binding contract is signed. This contract outlines specific obligations that each party must fulfill. If issues arise during escrow and disputes turn problematic, either party may seek legal remedies to enforce compliance.
What is Specific Performance?
Specific performance is a legal concept where one party demands that the other perform a contractual obligation. Although applicable in various situations, it is frequently invoked in real estate transactions. This is because courts recognize property as unique, often making specific performance more suitable than financial compensation.
In real estate, specific performance usually involves transferring property ownership. If a buyer meets contractual conditions, they may demand the seller complete the title transfer. Sellers may resist due to regret, unreliability, or realizing they undersold compared to current market values.
The Role of Courts and Lis Pendens
Specific performance demands can be challenging. Courts are often reluctant to enforce them since the defendant might sabotage the property or complicate the title. However, they are committed to upholding real estate contracts.
Depending on state laws, courts might issue a lis pendens, representing the buyer's monetary damages. This is recorded against the property's deed, complicating future sales for the seller. Title insurance companies will inform potential buyers of any lis pendens and typically refuse coverage, making it difficult, if not impossible, to sell the property.
Conclusion
Most real estate transactions proceed smoothly, but when problems arise, specific performance and lis pendens can become critical issues. Understanding these concepts helps navigate disputes effectively, ensuring contract obligations are met.
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