Specific Performance, Investor Protections, and General Guidelines

For real estate investors in Tennessee, a strong purchase and sale agreement (PSA) is the backbone of every deal. Understanding how these contracts work— and what happens if something goes wrong—can make the difference between a smooth transaction and a costly dispute.

I. Your Agreement Must Be in Writing

Under Tennessee law, real estate contracts must be in writing to be enforceable. This rule (called the Statute of Frauds) means that verbal agreements simply don’t hold up in court.

At minimum, your PSA should include: (1) a clear description of the property; (2) the purchase price (or how it will be determined); and (3) the signatures of both the buyer and the seller. If any of these are missing, you may not be able to enforce the deal—even if both parties intend to move forward.

II. Key Provisions Every Investors Should Include

A well-drafted PSA does more than just outline the deal—it protects your investment.

A. Property Description

Always use the most comprehensive legal description you can find. That may be a new survey, recent survey, or the prior legal description from a deed or recorded plat. A street address alone may not be specific enough.

B. Purchase Price and Earnest Money

Your PSA should clearly state (1) the total purchase price, (2) the earnest money deposit, (3) who holds the deposit (usually a title company, attorney, or listing broker), (4) when and how the deposit is paid, and (5) when the deposit becomes non-refundable.

Some contracts limit remedies to keeping the earnest money if a buyer defaults. Be cautious—this may prevent you from pursuing stronger remedies later.

C. Due Diligence Period and Contingencies

This is your “inspection window” where you can evaluate the property and walk away if needed. Calendar these days appropriately. Contingencies give buyers the ability to evaluate a deal and walk away if certain conditions aren’t met. A strong PSA should clearly define each contingency, including deadlines and what happens if issues arise.

Common contingencies in PSAs include:

•       Financing approval: Specifies the loan type, amount, interest rate ceiling, and the deadline to secure a commitment letter. This protects the buyer if financing cannot be obtained on acceptable terms.

•       Appraisal value: Requires the property to appraise at or above the purchase price. If the appraisal comes in low, the agreement should outline options such as renegotiation, price adjustment, or termination.

•       Title review: Gives the buyer time to review title and object to any issues (such as liens or easements). The seller typically has an opportunity to fix these issues, or the buyer can choose to terminate the contract.

•       Property inspection: Allows for physical inspections as well as environmental, zoning, and entitlement reviews. The agreement should include clear timelines and procedures for raising concerns and negotiating repairs or credits.

•       Survey results: Provides time to obtain and review a current ALTA/NSPS survey. This is especially important for commercial properties or deals involving multiple parcels, where boundary lines, access, and encroachments can impact value.

Many investors negotiate a “free-look” period where earnest money becomes non-refundable only after due diligence ends.

D. Default and Remedies

Your PSA should clearly define: (1) what constitutes a default by each party, (2) how notice of default must be given, (3) whether there’s time to fix the issue, and (4) what remedies are available. Without clear terms, disputes become much harder to resolve.

III. What Is Specific Performance?

Specific performance can be a powerful legal remedy in real estate. Instead of awarding money damages, a court can force a party to complete the deal.

For example:

•       A seller can be required to transfer the property

•       A buyer can be required to close on the purchase

Because real estate is considered unique, courts are more willing to grant this remedy that in other types of contracts.

When Can You Enforce a Deal?

To obtain specific performance in Tennessee, you must generally show:

•       A valid, written contract;

•       Clear and definite terms;

•       Fair dealing (no fraud or misconduct);

•       That money alone wouldn’t make you whole; and

•       That you are ready and able to perform your obligations.

Even then, courts have discretion and may deny the remedy if it would be unfair or overly burdensome.

A Powerful Enforcement Tool

Tennessee allows courts to issue judgments that act like deeds (Tenn. R. Civ. P. 70). This means that if the seller refuses to sign closing documents, the court’s order itself can transfer ownership once recorded. This gives investors a unique way to complete a deal—even without the other party’s cooperation.

IV. Seller Disclosures and “As Is” Sales

For residential properties (one to four units), sellers are usually required to disclose known material defects. However, investors usually use an “as is” clause, where:

•       The buyer waives formal disclosures, and

•       The buyer takes responsibility for inspections.

Important: Even in “as is” deals, sellers cannot hide defects or commit fraud.

V. Closing and Title Considerations

Tennessee is NOT an “attorney state” for real estate closings, meaning:

•       Closings may or may not be handled by a licensed attorney, and

•       There is no legal requirement for an attorney to supervise your closing.

 Investors should also:

•       Obtain title insurance,

•       Review title exceptions carefully, and

•      Ask for attorney review on specific title exceptions or provisions they do not understand.

VI. Practical Tips for Investors

To protect your deals and avoid disputes:

•       Use the right contract. Standard residential forms (like TAR) are designed for agent-assisted sales, not investment deals. They often leave out key protections investors rely on, such as longer due diligence periods, assignment rights, and flexible remedy options. Whenever possible, use a contract tailored specifically for investors. Many investors have two contracts - one for when they’re the purchaser, and another for when they’re the seller.

•       Include an express assignment clause. If you plan to assign the contract—or purchase through an entity—make sure your agreement expressly allows it. A contract silent on assignment may still be enforceable, but it leaves much more open to interpretation and potential dispute.

•       Preserve strong remedies. Be careful with clauses that limit remedies to keeping the earnest money. While common, these provisions can prevent you from forcing the deal to close through specific performance—often the most valuable option, especially in a competitive or rising market.

•       Clearly define dispute resolution procedures. Don’t leave disputes to chance. Your agreement should spell out: (1) whether conflicts go to mediation, arbitration, or court; (2) where those proceedings will take place; and (3) whether the winning party can recover attorneys’ fees. Clear terms here can save significant time and expense later.

•       Work with experienced counsel. Tennessee real estate law includes important nuances—especially around specific performance and closing procedures. If you’re doing more than occasional deals, working with an experienced Tennessee real estate attorney is essential to protecting your investments.

Conclusion

Tennessee law gives real estate investors strong protections—but those protections depend on the quality of your contract. A clear, well-structured PSA reduces risk, prevents disputes, and preserves your legal remedies. In short, your agreement isn’t just paperwork—it’s a highly flexible investment tool.