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

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 aclient 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.

Respect Realty LLC (Expect More)

 

At Respect Realty, LLC our agents believe in 100% dedication to client satisfaction.  We specialize in property and land acquisition around the Portland Metro and Vancouver, WA area. We delight in working with first time home buyers and sellers to guide them from start to finish. Our doors are always open and we are always happy to assist you with your real estate questions.

 

Reach out today, we look forward to talking with you!

 

Todd Clark and Seraina Aguayo (Owners of Respect Realty)

Respect Realty LLC (Expect More)

(503)564-3130

info@RespectRealtyNW.com

www.RespectRealtyNW.com

 

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Comment balloon 11 commentsRespect Realty LLC • May 24 2009 12:53PM

Comments

Todd

You just keep those ethics haning high.

Posted by Tom Braatz Waukesha County Real Estate 262-377-1459, Waukesha County Realtor Real Estate agent. SOLD! (Coldwell Banker) over 9 years ago

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...

Posted by Wanda Kubat-Nerdin - Wanda Can!, So Utah Residential, Referral & Relocation REALTOR (Prado Real Estate South) over 9 years ago

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

Mama Liz's Signature

Posted by Liz Loadholt, Realtor--Broker-in-charge - Trainer--Relocation Director Covering SC (Liz Loadholt- AgentOwned Realty- Covering SC) over 9 years ago

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

Posted by Terry & Bonnie Westbrook, Westbrook Realty - Grand Rapids Forest Hills MI Re (Westbrook Realty Broker-Owner) over 9 years ago

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

 

Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) over 9 years ago

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!"

Posted by George & Arlene Paukert (Road to Wealth, Inc.) over 9 years ago

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.

Posted by Paula Swayne, Realtor-Land Park, East Sac & Curtis Park -Dunniga (Dunnigan, Realtors, Sacramento (916) 425-9715) over 9 years ago

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. 

Posted by Lisa Wetzel, CDPE, SFR carsonvalleyland.com (RE/MAX Realty Affiliates) over 9 years ago

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

Posted by jojo over 9 years ago

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

Posted by Richard Weeks, REALTOR®, Broker over 9 years ago

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.

Posted by Respect Realty LLC, Brokers - Oregon / SW Washington Real Estate (Respect Realty LLC) over 9 years ago

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