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.
ABOUT THE AUTHOR Kris Berg is Co-Owner and Designated Broker of San Diego Castles Realty. If not-so static web sites are your thing, go here at once where you will find loads of real estate information including homes for sale, market trends, floor plans and more. Kris's hobbies include fencing and spot welding. She likes kittens. 
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I’ll venture the guess that this is a FSBO transaction. Or worse.
I am the buyer.
I just wanted to address the situation with the delay in closing and contingencies.
Back in January we wanted to purchase the property from the same owner and as our real estate agent was on his way to our home to have us sign the contract the seller backed out and stated they had a better offer.
After looking for another home for a few months the seller called our agent again and practically begged to have him call us to see if we where interested again. We agreed to go into contract with the seller at that time. Knowing the history of the seller we have not signed off on the contingencies.
At the 30 day point when we where to originally fund the Bank decided that our loan was too much risk going stated so we then had to go full doc. No problem we qualified instantly. We just had to get paychecks, w2’s etc so that took a week or so. During this whole process the seller has been in contact with our agent and was aware of the funding delay. On Tuesday of last week we signed our loan docs and the funding was to happen in 48hrs. At that point our agent, escrow contacted the seller and they stated they would be in the next morning to get all the final documents she needed signed so we could fund. On Wednesday morning she decides that she did not want to sell the house because of the delay in funding. Even going as far as having her sister in law threaten to sue our agent. FYI the sister in law is not, and has not been in the picture from the get go.
Thanks for your time.
Ben,
Again, I’m no attorney, but I would say you have a case for specific performance. Out of curiosity, was this a For Sale By Owner?
This post, and Ben’s story are two reasons I love doing business in Arizona, and especially Idaho. You aren’t gonna close on time? There better be an addendum or everyone throws a hissy-fit. And if you don’t perform, and breach the contract as a buyer? Say goodbye to your deposit – without your signature.
California’s real estate contracts, and the culture in which they’re executed, make them relatively meaningless for the most part.
In Idaho you perform or you pay – one way or the other. A contract is a contract there.
Yet another superior post, Kris. You make me feel like 9th grader in creative writing class.
BG – Thank you, but this was non-fiction.
Sadly so.
What a horrible situation to be in- curious though. You say you have an agent, but what does he (or broker) say or are they a discount brokerage? I have thoughts of several ways I would play this but if you are under a rep agreement, there is not much I can say.
If you have no confidence in your agent- ask to meet with his or her broker immediately for a solution.
Just a thought…
The Agent is representing both parties. This is not a for sale by owner. The broker advised me to get an attorney as he would best be able to advise me on my rights. The Galdjie vs. Darwish case seems to be exactly what I am going thru. Have any of you read up on this?
Great link of a similar case.
Ben – Setting aside for the moment, the legal ramifications, there is a glaring inconsistency in your case when measured against the “typical” escrow. When opening escrow, it is incumbent upon the buyer with the guidance and assistance of their agent and their lender to ensure that you apply for and process the loan in a timely manner. Usually, the underwriting is far enough along by the end of the typical buyer investigation period (17 days under our California contract) for the lender to give you the “all clear” so that you may waive your loan contingency. However, we have seen this accomplished sooner (10-14 days) many times. For your lender to decide, 30 days into a 30-day escrow, that you need to reapply for a full doc loan is highly unusual and, in my opinion, unconscionable. It puts everyone in “litigation” mode.
I would also like to hear the opinion of our resident mortgage guy, Brian Brady, on the frequency of this type of late hit from lenders.
(sidenote: one has to wonder if this is someone making a dual agency point)
I guess it was… to bad, would love to know how this ended.
Me too.
Back again with another post. We filed a lein on the property. We have also just requested a mediation meeting. This is most likely a waste of time. My attorney is placing a suit against the seller for failing to first provide a “failure to perform on us before simply requesting a cancellation of escrow. The seller tried to cancell the escrow a day after we signed our funding docs via a self made letter, not the official escrow cancellation doc. She has yet to actually sign the cancellation of escrow doc the title rep asked her to fill out to make this official.
Thanks,
amazing- please keep us up to date as to how this all plays out. Good luck, Ben
Ben, Sounds like somewhere in your steaming mound of contracts you did indeed have a notice to perform provision tied to close of escrow. This is quite a drama, and I share Benn’s (BR’s) sentiments – Keep us posted!
I just received a “notice to perform” Escrow closes on Jan 7th. My loan has been in underwriting for over 2 weeks and I am being told it is because of holiday schedual, under staffing and we have now had 2 extensions and here we are at the end of another week with no word on aproval. I personally hand delivered each document throughout the process, never once putting anything in the mail. My application is clean, credit score, income, everything is high and tight. So here we are just a few days from the close date, frustrated, in the dark, the seller has to be totally impatient. So I ask, why should I jeopardize my down payment because of the inadiquate performance of a bank…?
Oh btw, the bank was told by my broker two weeks in a row, “if we don’t get approval by Fri this deal is going to fall apart” and here comes another Fri. I am imagining a guy in a suit at his desk under swaying towers of loan ap’s. or maybe the towers above an empty desk as the camera cuts to a guy out on the golf coarse somewhere…
Jason,
Thank you for the comment, which I am going to elevate to a new post.
My original question didn’t post so my b t w didn’t make sense, so read this first. I just received a “Notice To Perform” Escrow was always going to close on the 7th. We were going to get loan approval on the Mon before Christmas and have filed for 2 extensions and 2 Fridays came and went with no word except it’s the holidays, they are short staffed, maybe tomorrow, and here we are at another Friday and 48 hours as I understand it, to perform. My loan ap is perfect, credit scores, income, solid everything high and tight so my question is why should I jeopordize my down payment because of inadiquate performance at the bank?
Update: The lender in an e-mail say’s that they will look at file on Mon(the day escrow was to close) and let us know then a date we should expect an answer… I now know that my ap has been sitting complete on someones desk since Dec 13th. So much for a 30 day escrow. Is this common? Is the lender usually the dead leg in a deal? I feel like sending flowers to the seller. She has a moving truck in her driveway and it’s raining… She has approved 2 extensions so far and now it will probably be another week. Thanks for giving me an opportunity to vent, this is great therapy.
JW – Don’t know if you saw the latest post, but we picked up the conversation there. “Is this common?” you ask. Not to the extent of your example, but lenders are most often the weakest lengths in terms of meeting timeframes. A thirty-day escrow is a pretty fast clip any time of year; during the holidays, it is quite optimistic. When you have Christmas and New Year’s Day falling on Tuesdays, a lot of people are taking those preceding Mondays off as well, which means you have lost four business days.
I know you were kidding, but I think the flowers idea is genius.
By the way, as a curiosity, are you deal with a direct lender or a mortgage broker?
I am dealing with a broker, and I actually did send flowers yesterday. The sellers agents broker called me yesterday to “qualify me” to put the seller at ease. I gave him my brokers # I really hope the bank can get an approval out soon.
It sounds like you are making progress, and I will say again that the flowers were genius.