Navigating Contract Disputes in Real Estate Transactions

From boundary or property line disputes to failures to disclose property defects and breaches of contract or duty, these are just some examples of contentious contract issues that may arise between parties to real estate transactions. The goal is to determine whether a dispute indeed exists and, if so, to resolve it as quickly and as cost-effectively as possible. This is precisely where the expertise of a real estate attorney becomes indispensable.. Below, we’ll share some of the most common contract disputes in real estate transactions and options for addressing them.

Common Property-Related Contract Issues

In our experience in reviewing real estate contracts here at Anderson Jones, PLLC, we’ve found that some of the most common disputes stem from:

  • Failures to disclose property defects: Here in North Carolina, we have a Real Estate Disclosure law that requires sellers and/or agents and brokers to disclose all known defects their property has before a buyer signs a purchase agreement for the home. Per the North Carolina Real Estate Commission, buyers can pull out of the contract within a set number of days without penalty under set circumstances. For instance, if material defects are initially concealed but are subsequently uncovered during an inspection, the buyer may be able to withdraw from the transaction. 
  • Good faith estimate issues: The Real Estate Settlement Procedures Act (RESPA) requires lenders to provide a specific document to homebuyers who take out a mortgage, listing all the anticipated costs and fees that they will incur to ultimately close on the home. A prevalent real estate dispute often stems from a disparity between the initial estimate and the final assessment.
  • Inspection issues: In home purchase agreements, a frequently included clause grants buyers the option to withdraw from the agreement if they have concerns regarding major systems such as plumbing, electrical, or HVAC, or if significant structural issues are identified by an inspector.Moreover, during final walkthrough inspections, concerns may surface that require resolution before the closing can proceed, potentially leading to delays. Issues can also arise when a seller or their agent argues that the identified issues do not warrant the home buyer’s right to voluntarily withdraw from the contract or delay the closing without incurring penalties.
  • Financing obstacles: It’s commonplace for buyers to negotiate the addition of a contingency clause in a buy-sell agreement. This may outline how a buyer’s purchase of the home, for example, is contingent upon them being able to successfully sell their current residence. Alternatively, there may be a clause stating that the purchase of the house is contingent upon a lender following through and providing financing. In both of these scenarios, the deal may fall through if the situation does not unfold as anticipated., Therefore, the contract should be clear about how parties can go their separate ways should such circumstances arise–misinterpretations regarding contingency clauses do occur.
  • Clear title issues: When a homeowner puts their home up for sale, they will contend that they have clear title to the property. If a title search proves they do not have clear title, whether because there are liens, property line issues, etc., it may require a quiet title action being performed to sort out true ownership. Quiet title actions entail additional expenses and may prolong the closing process before the sale/purchase can be finalized.
  • Escrow payment retention: A buyer or seller can withdraw from a purchase or sale for various reasons, including if contingencies are not fulfilled (as described in some of the situations above). According to the North Carolina Department of Justice, a 3-day “right to cancel,” “cold feet,” or “buyer’s remorse” pull-out option may also be applicable in cases of mobile homes purchased from dealers and other similar situations. Disputes may then emerge concerning who retains the earnest money deposit, which was specified in the purchase agreement and intended to contribute towards the home deposit.

The above concerns are just the tip of the iceberg as it relates to issues that can arise in real estate transaction contracts. There are many more concerns that can affect parties involved in commercial leases or purchase agreements. Additionally, there are many construction- or contractor-related matters. 

How a Real Estate Litigation Attorney Helps When Contract Issues Arise

The concerns we have discussed above are only a brief listing of matters you may face as a party to a real estate transaction. As you are likely aware, lawyers are well-trained in reviewing contracts and sorting out what terms and conditions apply to their clients. Therefore, engaging a lawyer should undoubtedly be your initial course of action when faced with a conflict, to determine whether a contractual issue indeed exists.

Should your legal counsel confirm there isa contractual issue or you have concerns that are not addressed in the agreement, they may advise you of your options, which can include:

  • Attempting to amicably resolve the matter with the other party through negotiation
  • Considering alternative dispute resolution like mediation or arbitration
  • Pursuing real estate litigation

A lawyer’s recommendations on the most suitable options for your situation are likely to depend on various factors, including the financial stakes involved and the nature of the dispute.

Whether you find yourself embroiled in a dispute as a buyer or seller or even perhaps as a landlord, if you want to clarify your contractual obligations or rights, reach out to our law firm, Anderson Jones, PLLC, to discuss your concerns.