Specific Performance

General Real Estate Investing
1

So the night before closing, we have issues. We currently have 4 SFHs under contract and were scheduled to close today. These are all owned by the same guy. He apparently owns two of these free and clear, one has a mortgage through a bank, and the last one is on a SBA loan along with a property his daughter owns. We can’t close because the owner decided he doesn’t want to pay off the SBA loan because his daughter’s property is on there too. From what I understand, the daughter’s property should be enough collateral for the SBA loan so our Realtor and the closing Atty. are going to try to get SBA to release his property so we can close. The closing Atty. was going to call the owner and tell him it is very serious if he doesn’t go through with this contract because it’s a legally binding document and we can sue over it. Assuming SBA won’t release his property without paying off the loan, here’s how I see the situation:

  1. He can use the proceeds from this sale to pay off the SBA loan and then hold a note for his daughter or she can get her own mortgage on it.
  2. We can sue for specific performance.

I’m hoping we don’t have to get a court involved, but if we do - what are some things to watch out for? Is it basically going to be black and white because we have a signed contract and the judge will side with us? Do we include in our lawsuit that the owner will pay all our legal fees since it’s his fault anyway? Any extra damages involved here for not performing the contract on time, wasting people’s time, etc?
Thanks

2

Have an attorney review your documents and tell you your options. It’s all in the details.

3

Would it be safe to say this shouldn’t be a long drawn-out process if we go to court because he signed the contract to sell to us?

4

absolutely not. There is centuries of case law regarding contracts. Plus there is the equity and public policy issues. It more a question of the parties willingness to comprise and settle. Less flexibility means more legal costs and court time. However, the threat of a lawsuit usually brings people into a compromising mood.