Ask the Broker – Time to pack?

Kristn.jpg If a buyer doesn’t close a transaction on time, should he still be packing or can the seller send him packing? I received this email regarding a seller’s right to cancel due to the buyer’s failure to close escrow on time: 

I am currently under contract to purchase a home in (San Diego County), and we have all funding ready and now the seller would like to back out. She states that is simply taking to long and that she just wants to cancell. She sent escrow a letter and wants us to sign. The escrow had gone past the 30 day time frame back on May 1st. now that funding is ready to be sent to her back the seller is trying to back out.

Do I have the right to proceed with escrow due to the sellers failure to perform?

First, I must emphatically state that I am not an attorney, and this is a question that is most appropriately directed to a real estate attorney. However, I will attempt to address the question in the context of the contract.

The California Residential Purchase Agreement and Joint Escrow Instructions contains a Notice to Perform provision (24 hours, by default) intended to address the situation where someone is not doing what they should be, namely, removing contingencies. Failure to perform where a contractual close of escrow commitment is concerned is another issue entirely. Under the “right to cancel” (paragraph 14(C)), the contract does specifically state that “Seller is not required to give Buyer a Notice to Perform regarding escrow closure”. This statement is in fact in bold type. The contract also states that “Once all contingencies have been removed, failure of either Buyer or Seller to close escrow on time may be a breach of this Agreement”.

Assuming you have removed all contingencies in writing, you are currently in breach of contract, as you admittedly are a month beyond the scheduled and contractual closing date. So the issue becomes, can the seller kick you to the curb due to the extended failure to perform? Strictly speaking, maybe. Realistically, they might be exposing himself to a legal challenge. When a buyer fails to perform any obligation other than closing the transaction on time, the potential implications are somewhat more clear. It becomes an issue of who keeps the money. If all contingencies have been removed, the earnest money is at stake; if contractual contingencies remain in effect, the buyer is likely to take his money and go home. In your case, you are at fault, more specifically “in breach”, yet you do not want to terminate the transaction. An attorney would probably tell you that your remedy would be to sue for “specific performance”, a court-ordered transfer of the property.

Most of us were raised in real estate with the notion that successful specific performance challenges were rare and that the chances of a seller being forced to sell against their wishes were slim to none. My understanding is that this has changed over the years, and that many, many judgements of specific performance have been made in favor of the buyer. In your particular case, you should absolutely contact a real estate attorney. I suspect they will consider things such as whether or not you are ready, willing and able to close the sale at this time, whether or not you have been communicating with the seller throughout the process concerning the need for and anticipated extent of closing delay, and therefore to what extent the seller has been an “enabler”, knowingly allowing the transaction to progress, actively participating in activities toward an ultimate close, and giving tacit acceptance to the delay.

From an agent’s perspective, my bigger issue is why in the heck are you 60 days into a 30 day escrow without having secured financing approval, and who has been minding your transaction store? We all encounter delays from time to time, but a delay of this magnitude is unnecessary and unconscionable. Someone was not doing their job.

As a side note, we do have an addendum to the Purchase Contract which is frequently used in San Diego which stipulates a 72-hour notice to perform for failure to close. If this addendum was used in your transaction, the seller need simply issue the notice to perform and, if in three days you have not closed, he can send you packing.

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