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REAL ESTATE 16: Specific performance of a real property purchase agreement.

Plaintiff offered to buy the property from defendant. The purchase price in the initial offer was $100,000 and closing was contingent on plaintiff procuring a mortgage loan in the amount of 100% of the purchase price.  The initial offer gave plaintiff three days after the date of acceptance to apply for the mortgage.

Relevant to the dispute the offer stated as follows: Buyer may waive the mortgage contingency by written notice to Seller or Seller’s Agent and pay cash as provided in paragraph A above. Buyer agrees to use his or her best efforts to obtain such commitment. If commitment is not obtained within 30 days of final acceptance of this offer, either party may terminate this Agreement by giving written notice to the other party and to the Listing and Selling Offices. If a commitment is obtained by buyer prior to receipt of such written termination by the Listing Office, then the Agreement shall not be terminated.

Defendant counteroffered, increasing the purchase price to $114,900, adding a provision for $1,500 in earnest money deposit, and making the purchase price payable by either cash or by conventional mortgage. Plaintiff made a counteroffer in return, agreeing with the $114,900 purchase price and the acquisition of a conventional mortgage, but changing the earnest money deposit amount to $1,000. Plaintiff’s counteroffer stated that all other terms remain the same.  Defendant accepted this last offer.

The day that the final draft of the purchase agreement was signed the real estate agent emailed plaintiff to make him aware of key information, stating as follows: You must apply for your loan within 3 calendar days, and I will need a preapproval letter from your lender asap. I will need your loan officer’s name and contact information. Also, I need to obtain from you a check for $1,000.00 earnest money tomorrow.

On January 9, 2017, the real estate agent again emailed plaintiff clarifying the terms of the contract, suggesting the defendant take action tomorrow, January 10, 2017 if you desire to change the contract terms to cash, as either party, Buyer or Seller, has the option on January 11 to terminate the contract by giving written notice to the other party. If a commitment for a mortgage is obtained by you and provided to the Seller prior to receipt of written termination by the Seller, then the contract agreement shall not be terminated.

On January 10, 2017, plaintiff gave defendant a memorandum purporting to be from a Financial Institution, indicating that it would back a mortgage commitment.  However, evidence was submitted at the trial court that this document was a forgery.

On January 17, 2017, counsel for defendant sent a letter to plaintiff indicating that plaintiff had exceeded the time frame to secure a sufficient conventional loan. This letter notified plaintiff that the document that plaintiff provided purporting to establish a commitment for a mortgage was fraudulent and that, based on plaintiff’s failure to comply with the terms of the agreement, the agreement was void.

On February 1, 2017, plaintiff filed suit to obtain specific performance on the contract. Shortly thereafter, defendants filed a motion for summary disposition pursuant to MCR 2.116(C)(8) and (10).

The trial court granted defendants’ motion for summary disposition under MCR 2.116(C)(10) on plaintiff’s claim for specific performance of a real property purchase agreement.

In granting defendants’ motion, the trial court reasoned that the validity of the loan was too suspect, particularly when plaintiff acknowledged that he drafted the letter detailing the alleged loan. The trial court further questioned the loans based upon the Financial Institution’s affidavit denying the loan’s veracity.  The plaintiff did not satisfy the contractual requirement to obtain a conventional mortgage and the contract implicitly included such a requirement and that defendant’s failure to provide such proof provided an alternative basis for the grant of summary disposition.

Finding the right attorney to assist with the purchase, sale or acquisition of real estate is critical.  Whether you are buying or selling a home or you are involved in a commercial real estate transaction, an experienced real estate attorney can make a world of difference.

To schedule a free consultation with an experienced real estate lawyer at our firm, contact our law office in Plymouth, Michigan.

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REAL ESTATE 18: If contract is silent as to time of performance, the law will presume a reasonable time.

The absence of an explicitly stated time for performance or payment does not render a contract invalid or unenforceable. One party’s substantial breach of a contract may relieve the other party of its obligation to perform under the contract. Substantial breach may be found in cases where the breach has effected such a change in essential operative elements of the contract that further performance by the other party is thereby rendered ineffective or impossible.

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