Tempted by the fruit of another - A NC home seller tries to sell the property to somebody else.
A home buyer enters into a contract to buy an MLS listing.
The seller’s listing agent calls to inform the buyer’s agent 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 isn’t binding - - for some reason that wasn’t shared.
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.
