Knowing Rights Important If Sale Goes Awry : Legal remedies: Courts give both buyer and seller options when the other party refuses to perform.

Most home sales turn out satisfactorily for buyer, seller and the real estate agent. But the few sales that don’t go as planned create the problems that often wind up in a lawsuit. If you know your legal rights, trouble can usually be avoided.

For example, several years ago I had a written contract to buy a rental house for 10% down payment and the sellers agreed to carry back a 90% mortgage for the balance.

But just one day before the scheduled closing date, the seller’s agent phoned to insist I pay at least a 20% cash down payment or he wouldn’t allow the sale to close.

But knowing my legal rights, I politely informed him if his sellers didn’t deliver the deed and sign the closing papers on schedule, I would sue them for specific performance of the contract and record a notice of lis pendens to cloud the title, so the house couldn’t be sold to anyone else.

About two hours later the agent phoned to say his sellers would sign the deed and close the sale on schedule.

What to do when the seller defaults. Home sellers often catch the disease known as “seller’s remorse,” especially if they have owned the home many years and refuse to complete the sale as agreed.

The typical symptoms are when the seller either demands a higher sales price than was agreed upon in the sales contract or simply refuses to allow necessary inspections or the appraisal and refuses to sign the closing papers.

The buyer has two legal alternatives. Since each property is unique, the most common legal remedy is to sue the seller for specific performance of the sales contract, asking the court to order the seller to deliver the deed as agreed.

Pending the trial, a lis pendens is usually recorded against the property to prevent its sale to another buyer. However, the court will order the contract enforced only if it was clearly written and there are no contractual uncertainties.

But disappointed buyers should be aware that the seller’s defenses to a specific performance lawsuit can include the following allegations:

1. The consideration was inadequate.

2. There is unreasonable hardship on the seller.

3. The seller’s consent to the sale was obtained by fraud, mistake, misrepresentation or unfair practices.

4. The sales contract is too vague for the court to enforce.

The buyer’s other legal remedy for the seller’s default is a lawsuit for monetary damages. However, proving exact damages can be very difficult, so buyers only use this remedy if they don’t want the property.

What to do if the buyer defaults. Many buyers default without a valid reason, such as inability to obtain a mortgage that was a contingency in the sales contract.

Some buyers refuse to complete the purchase because they change their minds about buying and think they can just walk away. Of course, some buyers cancel the sale because they discover a legitimate reason, such as misrepresentation of the property.

But smart sellers know their legal alternatives. One choice is to cancel the sale, obtain a signed cancellation agreement, refund the buyer’s earnest money deposit and put the house back on the market for sale.

This may be desirable in a seller’s market where there are more buyers than homes available for sale. However, the real estate agent should be consulted before choosing this solution, so there will be no dispute over the sales commission.

If the buyer lacks a good reason for canceling the purchase, the seller can keep the buyer’s earnest money deposit and may wish to sue for additional damages if they can be proven.

However, if the contract contains a liquidated-damages clause, then damages to the seller are limited to this agreed amount. But the seller should be aware that the buyer might sue the seller for refund of the deposit and for damages, such as for misrepresentation.

The seller’s second, but rarely used, legal remedy against a defaulting buyer is to sue the buyer for specific performance of the contract to force the buyer to complete the purchase. This was recently done successfully when the seller of a $6-million Los Angeles motel obtained specific performance from the defaulting buyer who tried to back out of the sale.

The appellate court commented that a breach of contract to sell real estate often cannot be adequately compensated by money damages, so specific performance is available to sellers as well as buyers.