By Nelson E. Timken
Unfortunately, when dealing with human beings who often change their minds or cannot or do not do what they promise to do, the situation can sometimes become quite complicated. Here are a few common questions which arise and often can result in problems for those involved in real-estate transactions.A seller asks: The value of my home has gone up since I signed the contract. Can I get out of the deal and sell the property to someone else for a higher price?With rising home sales prices in Queens County, many homes may increase in value dramatically between the time the contract is signed and the time it takes to complete the sale (i.e., the closing). Often, prices can rise as much as 10 percent. Realizing that they can now sell the property for considerably more money to another purchaser, many sellers want to cancel the existing contract.Often, they ask their attorneys to determine if there has been some technical breach of the contract of sale which would allow them to legally do this and to even retain the initial purchaser's down-payment, which is generally 10 percent of the total sales price, a substantial sum. However, sellers have to keep several things in mind before they decide to do this.First and foremost is the fact that the contract they signed is legally binding – that is, absent some valid excuse or uncured failure on the part of the other side, the seller must convey. They cannot simply walk away from the deal just because due to market fluctuations the price has now become less favorable for them.The second thing to remember is that there is a duty of good faith and fair dealing implied in every real estate transaction. That means that before one party may simply walk away from the deal, they generally have to give the other party a reasonable opportunity to perform under the agreement. As a practical matter, this often means that if the other side has not as yet performed all of their obligations under the contract, the party wishing to cancel the transaction must “make time of the essence,” – give the opposing party a deadline by which they must perform their obligations before the contract can be deemed to be cancelled.Caveat: If the seller fails to give the purchaser a reasonable opportunity to perform before canceling the contract, the seller runs the risk of being deemed to have breached the agreement and may expose himself to any remedies that the buyer may have available for that breach.A buyer asks: The seller of a piece of property is refusing to transfer the property to me. Can I demand that they do so?Generally speaking, if the buyer has performed all of her obligations under the contract and the seller is refusing to transfer the property for a reason which may be invalid or for no reason (perhaps the property has simply risen in value), the buyer may be entitled to “specific performance,” i.e., to sue the seller to force her to convey the real property to the buyer at the sales price agreed upon in the contract.Caveat: A buyer who seeks to compel “specific performance” of the contract must demonstrate that she is presently ready, willing and able to complete the transaction, i.e., that he has all of his financing in place and is prepared to take possession of the property, but for the seller's refusal to convey it to him.This is a part of a series arranged by the Queens County Bar Association as a public service to our readers. Nelson E. Timken is a member of the Legal Education Committee of the QCBA.
