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July | August 2017
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be tossed in the garbage. In reality, the buyer's concern was that
the property value had dropped to $33 million.
Transparent Communications
To identify red fl ags from a buyer, a broker and seller must pay
attention to changes in a buyer's behavior. For example, a buyer
may start communicating less frequently or continually request
extensions of the closing date.
If a seller notices these changes, he should discuss them with
the buyer. He also should create a comprehensive paper trail
showing his adherence to the contract and write every commu-
nication as if it is going to be used as an exhibit for litigation.
If a buyer fails to remit the balance of the purchase price to
the escrow agent and fails to close in a timely manner, the seller
should immediately send a letter showing the default and exercis-
ing his right to terminate the agreement and retain the deposit.
Should this result in litigation, the seller will be well-equipped
to successfully defeat a buyer's claims.
Reaching the Finish Line
Thinking moves ahead is important in a chess game and in
closing a deal. Unforeseen circumstances, however, are a part of
the process. Commercial real estate professionals should always
review the draft contracts, while keeping potential litigation in
mind. For any questions, they should ask the real estate attorney.
Typically, the contract will be the most scrutinized document
in this type of litigation. Having safety valves in place, a clean and
easily understood contract, and mechanisms to make the other
side think twice before backing out will help keep the closing
on track. For those engaged in a transaction, it is essential to
maintain communication throughout the closing process. Fol-
lowing these steps will prevent the necessity of wasting time and
money in litigation.
Javier A. Lopez, a partner with Kozyak Tropin & Throckmorton,
and Stephanie M. Gomez, an attorney with Kozyak Tropin &
Throckmorton, focus their practice on commercial, business, and
real estate litigation. Contact Lopez at jal@kttlaw.com and contact
Gomez at sgomez@kttlaw.com.
Real estate investors and professionals must have
safety valves placed into a
sale and purchase contract,
fi rst gently and then more rigorously, to remind
the buyer about the pain of backing out. Various
options are available on how to dissuade a
reluctant buyer from not signing a contract.
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