“Parties must follow the literal contract and also ‘good faith and fair dealing.'”

Real Estate Purchase Lawsuits

     The COVID crisis has accelerated real estate purchase disputes.  Buyers are backing out in the middle of the transaction.  Sellers are backing out.  I have a current case where the seller backed out after the buyer’s loan had funded.  The seller refused to leave even though the buyers’ furniture was being delivered!  Stress makes people act erratically and these are stressful times.

      The California real estate purchase contract, as presented by CAR (California Association of Realtors) has saturated content that has developed over a long time.  It changes with each new legal decision.  CAR has a team of attorneys monitoring the law at all times.

     The real estate purchase contract (RPA) binds both parties once the continencies are clear.  The contingencies are typically loan, appraisal and inspection contingencies.  In a seller’s market, you will hear someone bought a home “All Cash, No Contingencies.”  This means the buyer is so serious and adamant about the purchase, they are willing to purchase the property without having their own (or sometimes any) professional review the property.  “All cash,” means generally no loan, not literally bags of cash.

      During the contingency period, a buyer could back out of the deal in a manner consistent with the purchase agreement.  Parties must follow the literal contract and also “good faith and fair dealing.”

CONTINGENCY PERIOD

GOOD FAITH AND FAIR DEALING

   But after the contingencies are released (under CAR not automatically), the contract becomes truly executory.  That means both parties have an obligation to complete the terms of the contract…sale for money.  Seller must sell.  Buyer must buy.

EXECUTORY CONTRACT

      Nevertheless, if either party breaches at any time during the sale process, the parties are generally obligated to first mediate and then arbitrate under the current terms of the CAR RPA.  Generally, if you refuse to mediate, you may lose your right to attorney’s fees as a prevailing party.  If you head to superior court first, then you may lose your right to arbitrate.  Many attorneys will tell you that they would prefer superior court to arbitration, mainly because arbitrators are not obligated to follow the law and their decisions are not generally appealable.

      Any honest attorney will tell you not to sign the arbitration clause without qualification.