What should a buyer do if the seller tries to sell the property to somebody else?
QUESTION: My buyer client entered into a contract to buy an MLS listing a couple of days ago. The listing agent just called to inform me that the seller has entered into a contract to sell the property to a different buyer, and is apparently taking the position that the contract between the seller and my buyer isn’t binding for some reason that wasn’t shared with the listing agent. The listing agent is just as shocked as I am. Can the seller get away with this? What should the buyer do?
ANSWER: Even if a buyer (“Buyer #1”) has a real estate sales contract with a seller, it is possible under North Carolina law for a second buyer (“Buyer #2”) to end up with title to the property, if a deed to Buyer #2 is executed and filed. In such a case, Buyer #1 would have a claim for breach of contract against the seller and would be entitled to recover any damages they incurred as a result of the seller’s breach. However, Buyer #1 wouldn’t have any claim to the property itself.
So what can Buyer #1 do? If Buyer #1 really wants the property, and the seller is unwilling to perform their contract with Buyer #1, they should consider hiring an attorney to file suit against the seller for specific performance of the contract, and also file a notice of lis pendens (which means “pending suit”). See NC General Statutes § 1-116. Once a lis pendens is filed, Buyer #2 would be “bound by all proceedings…to the same extent as if [they] were made a party to the action.” See NC General Statutes § 1-118. What that means is that if a court ultimately determines that Buyer #1 is entitled to specific performance of their contract, Buyer #1 would end up with the property and Buyer #2 would probably have a claim against the seller for breach of contract. Practically speaking, the filing of a notice of lis pendens would make it difficult for the seller and Buyer #2 to close on their contract because the existence of the lis pendens notice would be a cloud on title that would make it difficult, if not impossible, for Buyer #2 to obtain title insurance on the property and/or get a loan.
In your scenario, you should strongly encourage your client to immediately seek legal counsel. If your client’s case is strong, the threat of filing suit and a lis pendens hopefully would be enough to discourage the seller and Buyer #2 from proceeding with their contract.
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