Complex Closing Scenarios and Dispute Resolution

Three days before closing on a $3.5M, 32-unit apartment complex, a third party files a lis pendens (notice of pending lawsuit) claiming an ownership interest in the property based on an alleged oral agreement with the seller. The title company refuses to insure until the lis pendens is resolved. Options: (1) the seller can petition the court to expunge the lis pendens if it lacks merit (expedited hearing, 2-4 weeks). (2) The title company may insure with an exception for the pending claim if the seller indemnifies the title company. (3) The buyer can negotiate a holdback—a portion of the purchase price held in escrow pending resolution. (4) The buyer can exercise the title objection provision and terminate the contract with earnest money returned. The buyer chooses the holdback approach: $200,000 held in escrow for 6 months, released to the seller if the claim is dismissed or to the buyer if the claim succeeds.

Five days before closing, the lender's final appraisal comes in at $2.8M on a $3.2M purchase price. The loan commitment was based on the lower of purchase price or appraised value at 75% LTV. Original loan: $2.4M at 75% of $3.2M. Revised loan: $2.1M at 75% of $2.8M. The buyer must either bring an additional $300,000 in equity, renegotiate the purchase price, find alternative financing, or exercise the financing contingency and terminate. The buyer presents the appraisal to the seller and renegotiates the price to $3.0M (splitting the difference). Revised loan: $2.1M remains at 75% of $2.8M (the appraised value still controls). Buyer equity increases from $800,000 to $900,000. The buyer accepts the revised terms because the lower price improves the cap rate from 6.8% to 7.3% and the cash-on-cash return decreases only slightly due to higher equity.

A buyer terminates a $4M acquisition after the due diligence period expires, claiming that the seller failed to deliver required financial documents (tenant estoppels and trailing-12 operating statements). The seller contends all documents were delivered and claims the $80,000 earnest money deposit. The escrow agent cannot release funds without either mutual agreement or a court order. Resolution options: (1) Mediation—a neutral mediator helps the parties reach agreement (cost: $2,000-$5,000, timeline: 2-4 weeks). (2) Arbitration—a binding decision by an arbitrator (cost: $5,000-$15,000, timeline: 1-3 months). (3) Litigation—court proceedings (cost: $25,000-$75,000, timeline: 6-18 months). The parties agree to mediation and reach a compromise: $50,000 released to the seller and $30,000 returned to the buyer. Key lesson: purchase agreements should include specific deadlines for document delivery with clear consequences for non-compliance.