Buyers Beware: Seller’s Real Estate Market Leading to More Lawsuits

If you’ve been out looking at properties around Greater Boston recently, you’ve probably learned that it is definitely a seller’s market when it comes to real estate. In most areas of eastern Massachusetts, inventory is low and a recovering economy is releasing demand that has been kept low for several years. The result: properties that are selling for in excess of the listing price.

This phenomenon can rear its ugly head when it comes to real estate transactions.
Some sellers, realizing that the market is tilted heavily in their favor, get “sellers remorse” and attempt to weasel out of offers that they have already accepted or purchase and sale agreements that have already been signed, all in an effort to re-market the property at a higher price.

The profile of seller behavior in these situations is easily identifiable. The seller either “invents” or magnifies a title problem, then claims he or she cannot deliver clear title to the property. In a recent case, for example, the seller claimed that she could not evict a tenant, and the P&S provided that the seller had to deliver the property “free of tenants and occupants”. However, the seller had already initiated eviction proceedings and had reached an agreement with the tenant for him to vacate the property on a date not long after the closing; the seller conveniently concealed this from my clients but we were able to obtain the information through inspection of the file on the eviction case at the court where the case had been brought.

Fortunately there are remedies available to buyers who suspect that a seller is fabricating title issues in an effort to torpedo a transaction: the most common remedy is a memorandum of lis pendens, which a buyer can obtain by showing a right to purchase the property. Once recorded at the registry, the lis pendens, which must be obtained from a court, operates as a “cloud” on the title and impairs a seller from being to sell the property to anyone other than a cash buyer who is willing to take a monumental risk that the seller will prevail in the lis pendens litigation. The recording of a lis pendens almost always results in the buyer being able to buy the property on the terms set forth in the P&S.

So if you encounter a seller who is giving you what you think is a fish story about title issues, be sure that your first phone call is to an attorney.

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