July 8, 2015
An axiom frequently taught to real estate agents and investors is “It takes one to buy and two to sell.” And that is in part true, but in part not true. As with many axioms, “it’s just not that simple.”
First, what does the axiom mean? In contract negotiations, one might have married couples, or even business partners, involved as buyers or sellers, The question this saying attempts to answer is “who has authority to sell” the real estate; “who has authority to buy” the real estate?
The seller’s side of the equation
As a general proposition, if a property is owned by two parties (spouses or tenants in common), it takes the signature of both of them to effectuate a sale. If we are going to legally enforce a contract for the sale of 1234 Main Street, you can only do that if both or all of the owners have signed the purchase contract. Thus, the shorthand saying “it takes two to sell.”
That begs a different question, however, which is if one person makes a promise that he is unable to keep (e.g., a husband promises to sell a house, but the wife refuses to consent to sell her half and won’t sign the deed), what is liability for the party who made the promise? In short, even though the buyer cannot succeed in vesting full title in himself in an action for Specific Performance, the buyer could still sue the seller for beaching his promise to deliver good title to the property. In other words, the single seller who cannot perform could still be on the hook for money damages for his failure to perform on the contract.
This concept is enhanced by two specific provisions of the Cincinnati Area Board of Realtors standard form of residential purchase contract:
- Section 6 has this: “Seller also represents that those signing this Contract constitute all of the owners of the title to the real property and other items as listed in Section 5, together with their respective spouses.”
- Section 19 has this: “Seller…shall convey marketable title to the Real Estate by deed of general warranty or fiduciary deed, if applicable, in fee simple absolute, with release of dower.”
Section 6 is frankly confusing in its wording. Does the contract require the signature of the spouses to be enforceable? It seems to lend itself to both interpretations.
Section 19 on the other hand says clear that the person signing the contract as seller commits to deliver a good deed “with release of dower.” To me that means that the seller is promising that if his wife or her husband’s signature is required, they will obtain it. It is not the buyer’s problem to obtain a second signature to secure that promise or performance.
Further, while we point out that the incomplete seller (only one-half of a married couple, for example) could be on the hook for money damages in the event of his failure to perform on his promises, it is equally true that the non-signing seller cannot be forced to execute a deed just because their spouse promised that performance.
As a practical matter, what does that mean? Well, several things:
- Only money damages are available for the signing seller’s breach.
- The remedy of “specific performance,” i.e., forcing a non-signing and recalcitrant seller to convey legal title to the property cannot be obtained in that circumstance.
- However, a buyer could still “foul the title” to the property by filing an affidavit of matters relating to title or a lis pendens lawsuit claiming in interest in the real estate due to the seller’s breach. Thus, even though the buyer cannot judicially force the seller’s performance, he also can prevent the seller from conveying clear title to anyone else. In that circumstance, we end up with an old-fashioned standoff.
The buyer’s side of the equation
We then have the buyer’s side of the equation. Can a buyer, married or not, buy property on his own? Certainly. A single buyer — without his spouse’s or business partner’s consent can, in his own name, buy real property. Thus, the saying “it takes one to buy.”
This means that if a married buyer signs a contract to purchase real estate and later has his wings clipped by a recalcitrant wife who refuses to sign, he still can legally be held to that contract either in an action for specific performance or for monetary damages. And it does not excuse his performance that his wife will not sign.
Then, this begs yet another question: Can the buyer finance that purchase? Well, for a married person to borrow money to buy real property requires the spouse’s signature on the mortgage for purposes of releasing her dower interest. So, contrary to the axiom, it may take “two to buy.” Now, if the buyer can pay cash or obtain a loan that is not secured by a mortgage, then he can buy on his own. But, otherwise, “it also takes two to buy.”
Finally, a buyer may be able to avoid his obligations under a contract if his spouse refuses to participate in the mortgage application process, but that is a more complicated legal analysis. It will depend on the contract language and the facts.