Specific Performance and Contract Complications

by Roslyn Katrowski

Every real estate transaction is a journey with its typical ups and downs, but sometimes a situation arises that profoundly reminds you just how complicated—and emotionally charged—real estate can get. We constantly remind our listing clients that once the contract is signed, especially after passing the Due Diligence Period in North Carolina, they should consider the home sold. This is because recourse options for sellers are limited, and the legal and emotional toll of a breach can be immense. This story underscores the critical importance of meticulous documentation and knowing the legal and financial implications before signing on the dotted line.

I was working with a wonderful buyer who was ready to close on new home on a Monday. All preparations were complete. Then, just before closing, I received an urgent call and email from the listing agent: the sale was off. Leaving my client homeless.

The reason was shocking: the seller's power of attorneys had been given incorrect information about the property, regarding the use of a Lady Bird Deed. They believed they were about to lose the entire proceeds of the sale—money intended for their retirement—because the funds would be seized by the government to cover their mother's Medicaid expenses. Ultimately, regardless of the validity of their fears, the sellers stated they could no longer proceed with the sale, effectively breaching the contract. This situation highlights that proper knowledge and documented legal counsel are absolutely imperative when dealing with complex financial and estate planning issues during a sale.

This sudden withdrawal immediately catapulted the transaction into the ugly side of real estate. When a seller breaches in North Carolina, the buyer has powerful legal recourse. In this case, that meant the threat of Specific Performance, a remedy unique to real estate. Because each particular lot and property is unique, a buyer can sue a seller to force the execution of the sale.

Furthermore, once the sellers failed to act in good faith and breached the contract, the clock started running on damages for the buyer. My client instantly began compiling substantial costs, including:

Due Diligence and Earnest Money Deposit
Inspections and appraisal fees
Moving costs until a storage unit
Hotel rooms and meals
Accumulating attorney fees

Complicating matters further was the circumstance surrounding the breach—a sale to keep proceeds "due to the government"—which sounded an awful lot like fraud. This quickly pushed the matter outside the scope of typical real estate practice. While I was still there to offer emotional support and make sure my client got the assistance they needed. This ventured outside the scope of an real estate agent and into the practice of law. So if you have heard your agent quote something to this effect, legally we are required to stay in our lane. When a situation involves complex financial, estate, or potential fraud issues, the only correct professional response was to immediately refer my client to an attorney and in this case a civil litigation attorney. As is often the case in civil litigation, this process becomes expensive really quickly.

The Unconventional Resolution

What followed was an intense, exhaustive negotiation—a true "back and forth" involving attorneys, clients, and agents. Eventually, after some time, an agreement was finally struck and damages were paid.

The resulting agreement had a truly unique structure: my client was able to move into the home and live rent-free and mortgage-free until the seller's mother passed away. At that time, my client would be able to buy the property at the original agreed-upon contract price that had been breached.

It actually ended up being a few years until the sellers’ mother passed away and the contract was back in place. This resulted in the next issue: those contracts were the property of the firm, and I was no longer with the same firm when the original contract was pulled back into place. The agency agreement had long since expired. This led to another flurry of phone calls to lenders, lawyers, and BICs (Brokers-in-Charge). I reached out to the original Real Estate Attorney and lender, and, if I remember correctly, a full three years had passed before the closing finally took place. Thats a long time for a deal to close.

This story remains one of the most complicated transactions of my career because of the numerous contract and legal issues that arose. Along with the three year time frame to close. It serves as a powerful reminder that proper estate planning, coupled with verified legal counsel, and having an experienced real estate agent when navigating such a complex transaction, is absolutely non-negotiable when selling a home. And on this saga alone, I could write a book.

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Roslyn Katrowski

License ID: 298980

+1(704) 315-9695