Real Estate 101: A contract signed under duress isn’t valid, but what is duress?

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Real Estate Broker/Owner with Respect Realty LLC 200311024

I remember from real estate school that if someone signs a contract under duress, the contract is invalid, but what is duress? Duress, to me, is someone holding a gun to your head and saying sign or die. But, there are, of course, lesser meanings to it.

So, how does this come into play in real estate today? Let us look at someone in a short sale situation who has lost their job. They have two banks, the first is getting all their money and the 2nd is taking a huge hit or getting absolutely nothing. If they make the seller sign a contract to pay back the money, or they won’t agree to the short sale, is this a form of duress? Is the contract valid?

Inquiring minds want to know?

OK, here is the story behind this question. I was asked this by a client who was trying to be forced in to signing this exact contract to pay back the 2nd what they were going to lose. I told him I didn't think it was because they weren't holding a gun to his head, but I said I would ask the experts and let him watch the answers and let him decide for himself.



Todd Clark - Broker / Sales Coach
Palazzo Realty Group
Phone: (503)524-9494
Fax: (503)622-8739





©2009 Todd Clark - Real Estate 101: A contract signed under duress isn’t valid, but what is duress?

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Rainmaker
1,849,338
Tom Braatz Waukesha County Real Estate 262-377-1459
Coldwell Banker - Oconomowoc, WI
Waukesha County Realtor Real Estate agent. SOLD!

Todd

You just keep those ethics haning high.

May 24, 2009 05:57 AM #1
Ambassador
1,959,843
Wanda Kubat-Nerdin - Wanda Can!
PK Real Estate Utah South - St. George, UT
So Utah Residential, Referral & Relocation REALTOR

According to the real estate dictionary...Duress is considered: A situation where a person is forced to enter into a contractual relationship against his will by the threat of imprisonment either to himself or his family, or the threat of actual physical force...I think your example may be a form of intense stress brought on by the possibility of losing a home...

May 24, 2009 06:10 AM #2
Rainmaker
316,320
Liz Loadholt
Liz Loadholt- AgentOwned Realty- Covering SC - Mount Pleasant, SC
Realtor--Broker-in-charge - Trainer--Relocation Director Covering SC

Todd --- As Wanda said, your example is definitely intense stress if not duress.

Mama Liz's Signature

May 24, 2009 08:05 AM #3
Rainmaker
575,448
Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re

I would love to hear the argument in court. I'm guessing today the jury would be sympathetic to the seller.

May 24, 2009 11:22 AM #4
Rainmaker
592,677
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Todd,

According to my Corel Word Perfect 12 built in dictionary:  duress >noun threats or violence used to coerce a person into doing something: confessions extracted under duress. -ORIGIN originally in the sense 'harshness, cruel treatment': from Latin durus 'hard'. 

"someone signs a contract under duress, the contract is invalid, but what is duress?"

That would make many if not most of today's offers invalid. For certainty if the seller bought in the last two or three years, today's realty is both harsh and curl!

 Duress properly applied is a great motivator!

In my book "One House At A Time / Finding And Buying Single Family Rentals" I tell the true story of an offer one of my students and I presented one night, at 10 PM I asked the closing question no one spoke until 5 AM when the wife shouted at her husband to sign the offer. Now that's duress! We closed just before the sheriff's sale on the subject and their current home saving both.

Bill

 

May 24, 2009 01:16 PM #5
Rainer
138,157
George & Arlene Paukert
Road to Wealth, Inc. - West Palm Beach, FL

Todd, like the others before and you yourself said to the client, it isn't duress, but what impressed me is you agreed to show your client others opinions and even was able to more establish yourself as an expert by using your blog. I'm betting in the end they will pass your information on to many other sellers telling them "Todd knows what he is doing!"

May 24, 2009 04:00 PM #6
Rainmaker
258,566
Paula Swayne
Dunnigan, Realtors, Sacramento (916) 425-9715 - Sacramento, CA
Realtor-Land Park, East Sac & Curtis Park -Dunniga

Hi Todd!
It is an interesting question, but I would tend to agree with my fellow Rainers...it is a tremendous amount of stress, but there are options, ugly as they might be.

May 24, 2009 04:36 PM #7
Rainmaker
512,581
Lisa Wetzel
RE/MAX Realty Affiliates - Carson City, NV
CDPE, SFR carsonvalleyland.com

Todd - I don't think you will be voiding the contract on this one. Great rhetorical question, but realistically, if there was enough money in the program to fund a lawsuit they wouldn't be selling short.  Also, there are options that will not result in physical harm, i.e.- foreclosure, bankruptcy, etc. 

May 25, 2009 03:59 AM #8
Anonymous
jojo

Why wouldn't you advise your client to consult an attorney as this is a legal question.

May 25, 2009 04:24 PM #9
Rainmaker
2,402,927
Richard Weeks
Dallas, TX
REALTOR®, Broker

Duress is defined as unlawful pressure.  The foreclosure process is not unlawful.

May 25, 2009 10:59 PM #10
Ambassador
2,067,223
Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate

Well, everyone after I had him talk to a lawyer and read your advice he decided that those late night infomercials that wanted his $995.00 to help them avoid foreclosure were a scam.

Jun 21, 2009 04:41 PM #11
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