A Closing Date without a closing February 24, 2006
(This post is authored by Craig Blackmon, an attorney in Seattle whose practice focuses on residential real estate — see his web page or his blog for more information. Please note that this post is not legal advice. You should consult an attorney for specific legal counsel.)
Your purchase or sale is scheduled to close on the Closing Date. What happens if, for some reason (perhaps a delay with the lender), the transaction does not close on the Closing Date? What are the rights and obligations of the buyer and the seller?
A discussion of this scenario begins with the “time is of the essence” clause. Virtually all purchase and sale agreements (including the forms used by the MLS), contain a clause indicating that time is of the essence. When a contract does not contain such a clause, the law affords the parties some flexibility in regards to performance of their contractual obligations. With such a clause, however, the law requires the parties to perform as indicated by the contract. Thus, assuming the contract indicates that time is of the essence, the transaction must close on the closing date or there will be problems.
If the transaction fails to close because a contingency was not satisfied, such as a financing contingency, then both parties are absolved of their contractual obligations. A contingency is a “condition precedent” — i.e. a condition that must be satisfied before the contract binds the parties. So, if the contract includes a financing contingency, and the transaction fails to close because the buyer did not get financing in time, then neither party is in breach of the contract. The contract simply expires. If the parties want to proceed with the transaction and close beyond the closing date, they need to so agree in writing by amending the contract prior to its expiration.
If the transaction fails to close because one of the parties did not live up to their obligations, however, then the other party may have an action for breach of contract. For example, suppose the seller fails to execute the documents necessary to convey good title to buyer. If, at the time of closing, buyer has performed its obligations, then buyer has a breach of contract claim against the seller. Note, however, that the buyer must have tendered performance — i.e. deposited the funds with escrow to purchase the property — in order to have a breach of contract claim (with two exceptions noted below). If neither party has performed its obligations by the closing date, the contract expires.
If buyer did not tender performance, buyer may still have a claim if seller either waived the “time is of the essence” clause, or otherwise acted in a manner inconsistent with an expectation of performance on the closing date and the seller relied on that action in not performing (the legal term is “collateral estoppel”). In either case, the law concludes that the buyer has a claim because the seller has acted in a manner inconsistent with enforcement of the closing date.
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Article Tags>> Buyer-Information | Real Estate Law
- Posted in : Buyer Information, General Real Estate
- Author : craig
Comments»
Great post Craig! Both Craig and I have received calls from unhappy buyers or sellers who want to make a claim for breach of contract against the other party because that party did not perform. One of the first questions that we ask is “Did you perform your end of the bargain?” If the answer is “no”, then all of a sudden the case got much tougher. The general rule is always come to closing to perform your obligations (seller = deliver deed/buyer = deliver funds) as if the other party is going to perform, even when you don’t think they will. If you do, you will likely eliminate the argument that the agreement expired because neither party performed.
I think it is worth mentioning that closing dates are extended very often, without much ado, every day. A simple Form 34 that says “Closing date to be extended to” signed by both buyer and seller.
Usually a buyer and their agent can cancel a contract during a legal “out” phase, such as the home inspection timeframe, if there are insurmountable problems. Even if the problems involve the loan early on, sometimes it is easier to close out on the inspection contingency or the resale certificate cancel timeframe.
Many closings need to be extended and are not ready to close on time. These situations are often handled with a little fast shuffling of the two agents and without an attorney
One of our agents had a very difficult situation where a lien came up in the buyer’s name at the last minute from an old school loan. The seller had already moved out and it took two weeks to pull it all together. It was tense, but all’s well that ends well! Agents handle these situations day in and day out, and most often everything is resolved, even if it is past the closing date in the contract.
Ardell, you make a good point that I should have made clear in my original post. By mutual agreement, the parties can extend the closing date (although there could be an issue if there is no additional exchange of value — i.e. consideration). Thanks for the clarification.
As for the “fast shuffling” of the agents, we all know that, by law, agents are restricted to filling in blanks on pre-printed forms. Anything beyond that constitutes the unauthorized practice of law. The extension of a closing date by mutual agreement of the parties probably falls within that rule and probably is permissible (although I am unaware of any specific legal authority that addresses the issue). Nonetheless, as the issues with a transaction grow more complicated, it becomes increasingly important to consult legal counsel, whose guidance is not restricted and who can offer comprehensive advice and assistance.
Craig and/or Russ-
Received some faxes over the weekend and a couple of them were P&S addenda. I imagine that if you were just browsing some of the written addenda language, it would probably make one chuckle. How strict is the law regarding blank addenda being filled in by agents? Some of the addenda language can be quite lengthy–so the presumption is that law is being practiced?
As escrow folks, in most cases we understand “intent” of the agent, but, we can’t count how many times problems occur due to poorly written addenda regarding closing cost contributions. In several instances, sometimes due to lender requirements, the seller ends up paying significantly less than what was intended, to the dismay of the buyer and moreso to buyers agent who crafted the lanquage.
One example of a problem that recently erupted post closing: an irate seller called after closing (naturally) and found out that they were required to pay for a specific policy for the buyer. The written addenda about this was very clear. The problem was that the sellers agent meant to write the opposite. The buyer was to pay for it. Please don’t ask how this misunderstanding was “missed” after they read and signed the addenda mid-transaction, and then the line item HUD selling fees were discussed at signing. I suppose the fog of a sale.
Here’s another one that brings smiles and I quote verbatim: “buyer to walk through home five days prior to closing.”
I think our Realtor clients would get a kick out of us publishing a quarterly review of the funniest written P& S language. It would be like David Letterman’s TOP TEN.
Shhhh.we only fill in the blanks.
I asked a lawyer once if I could get concurrent sentences for all of the clauses I’ve written over the last 15 years
Seriously though, I did ask an attorney what the penalty was for “practicing law” by writing a clause. His answer was that I would be held to the same standard as an attorney would be for the clause written. And here I thought I would be handcuffed and carried off in a paddy wagon.
Of course agents write clauses and don’t just fill in the blanks. We couldn’t do business if we didn’t. What are we supposed to do? Find an attorney with an hour’s notice on a Sunday night? Why is there a blank Form 34 if we are not supposed to write on it?
Legacy
I used to teach a Risk Reduction class for Realtors and one of the sections was on agent-drafted addenda. I had a whole list of real life clauses that agents wrote. Most were funny, some made you wonder if illegal substances had been consumed prior to drafting.
I will try to recall some of these for a future post.
Russ
Please do!
Ardell, I note that the NWMLS forms manual provides instructions as to the appropriate use of the Form 34. Per that manual, an agent “cannot use or insert language not prepared by an attorney” into the form. Rather, an agent should use one of the “special” clauses included in the manual.
As for the unauthorized practice of law, you’re correct, you will not be arrested. However, such conduct may give rise to a claim under the Consumer Protection Act. If a plaintiff prevails on such a claim, the plaintiff is entitled to treble damages up to $10k, plus an award of attorney’s fees and costs. Accordingly, while you won’t lose your liberty, you do face sigificant exposure.
True, however I do not believe that Special Clauses section has been updated since October of 2003. I could be wrong on this one, but I do not believe there is one written yet to handle Escalation Clauses.
There are several there that I have refused to use and insisted on an attorney handling, or the escrow company preparing, such as the paperwork involving a seller carrying a portion of the financing.
I have also seen a poor agent botch the implementation of the Multiple Counter Form. He didn’t write it himself, but he had no clue how to use it and more than one buyer opened escrow.
That being said, unless you are in NY or North Jersey, it is not likely that every agent will be using an attorney when writing contracts on an everyday basis. In my experience the need for special clauses hits an agent on the spot and every special clause of the future is first done by an agent. Because there was no way to foresee the need. Once these situations present a need for a special clause, such as buyers providing the willingness to escalate their offer or the seller wanting to counter more than one buyer simultaneously, attorneys are called upon by agents, or companies or mls services, to write them for all to use. But the very first time…it’s usually an agent unless there is time to have the attorney do it beforehand. In these situations, I often write the clause and add a 3 day attorney review and revise of said clause into the contract.
In the meantime I am relieved to know that there is no minimum sentence for writing a form 34 that says “Closing to be changed from 2/25/06 to 2/26/06″
Great post Craig.
To add to the topic, I offer the scenario where, in a contract w/o a Time of the Essence clause , the buyer is delaying the closing beyond the contracted closing date. What’s the seller to do? Some feel they have no choice but to wait because they dont have the TOE hammer. But, it is possible to “make” time of the essence by sending reasonable written notice (at least 30 days) to the dilatory party. At the now imposed TOE date, so long as seller is ready and able to close the buyer takes a risk of losing his downpayment if he does not close. Of course, every case is unique but this outcome is certainly in the cards.
3 cents — great point. This is certainly a strategy worth considering, although as you point out every situation is unique.
my Dad was selling his house to get the down payment for a bigger house. the buyer’s agent cancelled the closing twice i believe the reason was the credit which we understood and wait one more week. the 3rd time my dad and i called to get directions on how to get to the tittle company, the secretary told us there was no closing schedule. after all this mess we find out that the buyer didn’t qualify for the loan and they had an interest of 9% or something like that. The bottom line is that we i had to purchase the house from my dad of course he left money for the down payment and on the top he paid about $10,000 for closing cost for buyer and seller. i need to know if there is a way to get compensated for this and who do i have to talk to.
Are there any pre-conditions to not closing on the closing date. The buyer’s layer called and said that there was a problem with the mortgage and that we could not close for another week. We later found out from their broker that that was not the case. In fact she was not aware that the lawyer had decided to postpone the closing.
As a result, I have lost about $3,000 in airline tickets for the family to move abroad not to mention carrying the mortgage for another week.
I’ve asked my lawyer to issue a “time of the essesence” notice. So two questions: Can a buyer decide to post-pone the closing without valid cause (e.g. I just felt like it). And how does one go about getting compensated.
I am in the similar predicament as with DJ but then the problem is with the seller…he did major work in the property and he didnt apply for a permit…he is not issued a CO/CC and our closing date is pending….our lawyer applied of the “time of the essence” notice (10 working days)….im just wonding…what if he hasnt flfilled his obligations after the 10 days? what would be the next move? i only have 20 days left after my lock in my rates expires? …how does one get compensated if we dint close in a reasonable time and i have to lock-out a new HIGHER interest rate? can I demand to deduct the balance to the escrow?
I feel badly that no one has answered Ana, DJ and Joyce. However, two of you have indicated that you have an attorney, so I think your respective attorneys are the ones who should address this.
Here In Washington, and every state I have worked in, we have a “time is of the essence clause” in the contract. So invoking a 10 day notice that time is of the essence is somewhat foreign to me. I have only heard of it in NY and North Jersey were attorneys handle closings.
Sounds like Ana’s Dad’s buyer got out on something in the finance contingency that had a rate cap of less than 9%. Here we do not have “rate not to exceed x%” in our finance contingency addendums. Though that clause has been in the finance contingency in every other state I have worked in.
These three people remind us that no one should enter into a contract without intending to complete it. Often people ask me, when can I cancel?, when they are making an offer. I say stop a minute and don’t do this if you are not sure that you want the house. Many people are negatively impacted when there is a cancellation, so you shouldn’t start something you don’t intend to finish.
Thank you, Ardell, for addressing those questions. I had not done so for two reasons. First, I’ve been rather busy, and blogging has slipped significantly down my “to do” list. Second, I get nervous when I provide answers to questions specific to a person’s situation. I don’t know where Ana, DJ and Joyce live, and so I don’t know what laws apply to them. In fact, unless they live in WA, I’m not licensed to practice law in their state and therefore should not provide any sort of legal guidance. If I do provide such guidance, someone could possibly conclude that I have formed an attorney-client relationship, and then I would have an obligation to provide competent legal counsel, which is tough to do in the context of a blog post.
Ultimately, any time you have a legal question specific to your situation, you need to consult an attorney in your area. Admittedly, this can be expensive, but it’s the only way you can get legal counsel.
I totally agree Craig. Just don’t know the courtesy rules for responding or not responding to Blog post comments. In my posts when people bring up specific cases, I invite them to email me off the blog, which they generally do.
Each of the three people are looking to be compensated for their losses, but each has a different scenario.
Perhaps a post on the recent theory that sellers should put up Earnest Money that gets forfeited to the buyer if the seller can’t close deserves some attention in a post.
Generally the seller can say “no extension unless you pay my costs”, but the seller than has to risk going back on market and finding a new buyer. Often not as good as closing just a few days later with the buyer in hand.
In Joyce’s case, we often close without permits on improvements for resale property. So I don’t know what is preventing the close. Clearly owners putting in improvements without obtaining permits is a very commy scenario everywhere.
In some instance CO/CC are not required in some counties in NJ for resale homes but the buyer made a lot of improvements in the basement (plumbing) and that requires a work permit and an inspection which he didnt apply for and this is one of the requirements from our lender. Anyway, we already filed ” time of an essence” notice and it will expire in 2 days. My husband and I decided not to give the seller anymore extension. We have a feeling and this has been relayed to us from the seller’s realtor that he is sour-graping about the whole sale. He feels that his asking price was too low when he placed the property in the market. We decided with no extension because we went with the buyer’s terms (early closing, a full asking price and a hefty downpayment). I just want your opinion on what we can do next…i understand that we have to discuss it with our lawyer but I want another opinion…thanks for the replies and i really appreciate it
Joyce, it depends on how much you want THAT house. So answer that for me.
Sounds like North Jersey and not South Jersey. It gets complicated because it sounds like “your” lender may have a restriction of funding that a different lender may not, based on your latest info. In that case it may be your default and not his…so you really need your lawyer to determine if you are required to find a lender without that restriction under the terms of your contract with the seller.
Everything YOUR lender wants, that another lender may not want, does not necessarily become the seller’s problem.
If your home inspector said it was all done very well with no defects or problems and Title says there are no encroachments caused by the addition, etc…and the only issue is YOUR lender’s requirement…how is that the seller’s “fault”? Not an easy problem there and you need your attorney to sort it out.
I worked South Jersey and Bucks County and many, many, many homes closed without permits for additions. Seems maybe a little unreasonable on your lender’s part. Maybe the lender could be persuaded to drop the matter if you have a clean inspection and title report? Do you want the house if you can close it without the permits?
It’s all gray area for sure… If a cash buyer could buy it without this problem, then the problem is caused by you via your lender. That’s just a clearer way to see whose problem it really is…though I don’t mean to be insensitive, I am thinking your attorney might look at it this way. Clearly the seller’s attorney may be looking at it this way, so I thougt it might be helpful to give you some different perspectives on this difficult and not black and white problem.
If the seller goes back and gets permits to the date of closing, he may be liable for the taxes on the addition back to the date they were put in. Does your sales contract require permits for additions be provided by the seller?
How much do I want the house? I guess I want the house but not to the extend that I will incure too many problems from the seller’s lack of responsibility. The sales contract requires he provide for permits for the addition of the house and the seller agreed/signed the contract. The contract stipulates that the he needs to provide the permits (which he didnt) and the CO/CC on closing. His lawyers and the seller knew the requirement andthey have agreed to provide it. So anyway, we will see in 2 days and i will let you know. we may have a change of hearts…the question still lies…How much do we really want this house…Ardell, thank you for the replies…it gave me a different perspective of our situation
You are very welcome, Joyce. Since the contract calls for permits, and he cannot provide them, then I think it is likely your call. But check with your attorney and then decide if it’s worth waiting for the permits based on how much you like the house, and how many others are generally available that you like just as much or better, at the same price. Not how many are “for sale” today, but how many are “generally” available for those willing to wait. And then decide.
If you have been looking for a year and this is the only house suited to you in all that time, for example, you may want to hang in there.
My husband and I are having a home built. The closing date has been extended several times. We are now in the +15 days part of the clause and it doesn’t look like the home will be finished. We are incurring significant financial costs associated with this (including having to extend the lock on our loan). I am unsure as to whether we have a TOE clause in our contract (the contract is not in front of me). My question is, do we have any legal recourse?
Karlene, as I note above I am not comfortable providing specific legal guidance in the context of a blog. For starters, I don’t know what state you live in, so there’s a very good chance that I am not even licensed to practice law where you are located. Morevoer, there are a myriad of additional facts that are or may be relevant. For example, I don’t know what you mean by the “+15 days part of the clause.” If you want legal counsel and guidance about your specific issue, I suggest you contact an attorney in your area.
Craig
Hi, i have one prob. seller did not provide tax information on time, he gave tax pappers right 8 days before escrow close date, we can not get loan done untill another 21 days, now loan is done but seller denies to sell the property, but we want to buy so wht happens in that case??/
Jay,
Something doesn’t look right there. His “tax papers” and your loan are not usually related. The lender doesn’t get info from the seller to process your loan. Sounds like the seller is angry with you, and possibly rightly so. What State are you in? Tax info generally is public data available within seconds by an agent. What does your agent say?
Jay, as I indicated in my email directly to you, I encourage you to speak directly with an attorney in your state. This is a legal issue and you should get input from an attorney. While it never hurts to get input from your agent, your agent is not an attorney and is not licensed to practice law. Rely on your agent at your peril (and at your agent’s peril if, in so relying, you suffer injury, as your agent is engaging in the unauthorized practice of law and may be liable to you).
Craig
I agree with Craig on this one, if you want the house and you want to force the seller somehow to sell it to you by blaming him for your inability to close…a lawyer is definitely your next step and pronto. But you may want the agent and closing agent to write down what happened, for the attorney’s benefit, as something doesn’t sound right there. You don’t want your own agent and escrow to be “witnesses against you” if your undersanding of what transpired doesn’t match their rendition.
I will like to ask a question: I live in NYC, and selling a house. The Official closing date is a week from today, but the buyer’s lawyer has not finish the “title search” yet, even he has he ordered on December. If the “search” can not comlete before the closing date. Can I (sekker) not sell the house to the buyer without any fine because of buyer’s false? and can I recover my expense (ex. lawyer fee) from him? Thank You!
Leon:
You need to consult with an attorney in your area. I cannot and will not provide legal counsel via the web as I am not familiar with all of the facts relevant to your case, I am not licensed to practice law in NY, and I don’t get paid for free advice. Best of luck.
Leon,
Generally not in NYC…that’s GENERALLY, but ask the attorney. Time is of the essence clause there is usually invoked after the fact, and not at time of contract. Usually everyone is put on a ten day notice AFTER the problem to straighten up their act. Only place in the Country I know of that does it that way. Except North Jersey, which for all intents and purposes IS NYC as to real estate practices.
Wow, a lot of individuals have taken this off to other specific cases and topics. I want to go back and address Ardell’s remark about the Form 34 for extensions. You don’t need to use the blank form for extensions. The NWMLS has forms for just this purpose. There is also a NWMLS form for escalation clauses now becauase of the proliferation of all the individually written forms that individual agents and broker’s offices were using. So, there is no need to go to a blank form in these cases. At times there are compelling reasons to use the Form 34 and much of the language we use in these cases are drafted by the attorney that we keep on retainer. I’ve recommended over and over to agents (and on many of my blogs) that ALL agents should have a relationship with a qualified attorney to help in these kinds of scenarios.
In response to your question, Ardell, about “what do you do on a Sunday?” Well, the computation of time element of NWMLS contracts generally doesn’t require responses to be done on a weekend. Many agents have missed this piece and you should be able to contact your attorney on a Monday to help with your issue.
Hi, I have a potental “situtation”. I live in Washington state and my wife and I have been looking for a house for some time and finnaly found “the one”. We made an offer and did an earnest money aggrement with a closing date “on or before Jan. 27″ which was accepted. We were preapproved and so the paperwork went pretty smooth. I performed the home inspection myself having worked in the trades for some time and noted a defective appliance and requested a home buyers warrenty with my inspection. The seller offered to provide $300 toward the appliance replacement and $300 toward the home buyers warrenty ($600 total) which we accepted. We just went in and signed our portion of the closing papers and paid closing costs at the title company. We were informed the seller’s lawer had advised him not to sign yet until he (the lawer) finished the probate of the property! I was shocked to hear this was the case and further that the seller’s intent was to provide us with a home depot gift card for $300 dollars! My wife paid for the closing costs by withdrawing from her retirement account at a substantial penelty and was informed the house will not close until “after January sometime” We have given notice at our appartment expecting the house to close on the 11th of January (the date on the papers we signed today (the 9th) and so will soon be without a place to put our household goods or live. In addition the inspection settlement that we aggreed on and signed specified $300 not 300 home depot dollars or 300 monolopy dollars. We really love and want the house but can a seller even market a house that has “probate issues” and would not the title search disclosed this? I realize I will need to speak to an attorney about this for specific action but do you think I have a case for damages as far as the seller defaulting on the closing date (assuming that happens) or trying to honor the inspection aggrement with home depot dollars? I suspect the seller may have “sour-grapes” syndrone over the aggreed purchase price but if that is the case does Washington state have Lis Pendens? The seller was not present at our signing and the officer at the title company who helped us did not talk to he seller until we were just finishing up. We did not hear the phone conversation but it was relayed to us by the title company officer. A lot of questions I know, but thank you for your considertion.
Lee
Lee,
I’d say you moved from a “potential” situation to a “full-blown” situation a few days ago!
I hope someone on RCG can help you but my guess is that, as you suggested, you will need to talk with a lawyer at some point soon.
Sigh…yes..we are hoping it does not come to that and that the situtation can be resolved prior to the 27th (our drop-dead get moved and clean out the apartment date) As you may understand I am livid that this bomb was droped on us at the last second. Our loan broker and real estate agent are supposedly working on getting specific information for me today and I will know better what we need to do but I am thinking that if we cant resolve this successfuly in a very big hurry we wll incure some pretty heavy debt with finding a place to live and getting moved which I would hope to pass right along to the seller for breaching our closing date contract and not disclosing the “probate status” of this property until the last second. The tangled web some folks weave……
Lee
Lee:
I would be happy to help, but I simply cannot give legal advice via comments on a blog post for several reasons. Call me today at your convenience to discuss (206-357-4222). In that conversation I can discuss general legal principles and whether you may benefit from legal representation. If you want specific legal counsel for your particular situation, we can discuss the terms of my fee agreement.
Craig
Reba,
When you “go back” on a blog…try to put the number of the comment you are addressing. I glanced back to February of 2006…and can’t pull it out easily. You are addressing me specifically so put “in Ardell’s comment # X above from six months ago”…something like that, so we an try to remember what context we were using several months ago.
Dustin,
There really is no way anyone can help Lee on a blog…seller default or delay is not covered as well as buyer default or delay in contracts. It is one of the issues some are fighting for…an Earnest Money Deposit put up by the Seller, to go to the buyer, if the seller defaults or delays. A reverse scenario. I don’t see that concept gathering any steam though.
If seller defaults, the buyer’s logical remedy is specific performance — a lawsuit seeking a court order requiring the seller to perform its obligations under the contract. Of note, an argument can be made that that specific performance is not available if the buyer has limited its exposure in the event of default to forfeiture of the earnest money. Thus, in those instances where a buyer is concerned that the seller may default, it may make sense for the buyer to NOT elect that limitation so as to clearly preserve the buyer’s ability to seek specific performance.
Craig,
Thank you so much for your insights and time during our phone conversation today. I am going to wait until the 27th as we discussed and see what happens. If we are not able to reslove this by then I will be contacting you with a retainer to persue the issue. If we are able to resolve this I will be breathing a sigh of relief and posting here eather way so folks know what is happening. I would like to thank everyone for their thoughts and time in responding to my problem and also to say what an awsome site this is, I feel very fortunate to have stumbled across it!
Lee
Hi there-
Great post. I was wondering if my situation fell under this category, and if each state had different laws for handeling closings. I live in NYC and am in contract to buy a condo here. At the beginning of December is when the contract was signed and it included specific language that the closing was to be on or about 40 days from the time the seller signed the contract. That was to be next week. This pas Thursday, with our lawyers trying to settle on the date, the seller turned to her lawyer and said “im not ready. I am busy at work and dont have time for this now. Lets do it the 2nd or 3rd week in February.” From the get go my side has been up front and clear with the seller that time is of the essence and I need to vacate my apt by January 31st (for other legal reasons).
My lawyer said she has the right to delay the closing 30 days (as I do), yet I cannot find any law that states that or what the process is for doing so.He said we could file a “time of the essence motion” but it would be denied more than likely. (Doesnt the “on or about 40 days” language constitute time of the essence? In addition to our brokers mutually agreeing to a expedited process?)
My side is ready to go and can close any time. I want to see if she is in her legal right and if protocol was followed. She has been very difficult from the start and now this. So I want to know what my legal right is and how I can push this through. I am willing to delay it a week but not 4. Is there a formal way the sellers side needs to notify the buyer?
She has had quite alot of time to prepare for the move. I am not sorry if she is unable to multi task and be organized. It should not come down on me.
Thanks for your help in advance.
I will never understand how NYC and vicinity gets away with that “on or about” closings, with no time is of the essence clause. It’s been that way for as long as I can remember. How do people give notice and hire movers? Honestly, while it does not help you any, we are just soooo glad that no one else does it that way.
You already answered the legalities “My lawyer said she has the right to delay the closing 30 days (as I do),” No one’s going to second guess your attorney here.
Thanks Ardell for your prompt answer. I guess my question/complaint is (and it may be hard for you to answer not being in NYC) is why isnt this clause talked about when all the papers are being signed. Its like having a get out of jail free card in the back pocket. I as the buyer then have no rights and its a lose lose situation. She wouldnt pay for my stuff to go into storage and I cant stay past the end of the month. I am just looking for some recourse or compromise to the situation.
Medaguy,
Nothing makes me angrier than the state of affairs regarding NYC and buyer’s rights…or more appropriately, lack thereof. I freak out about it from time to time when the NYC bloggers come over here
I worked Bucks County in my early days in this business, and I am absolutely appalled at the lack of progress out there.
Hate to say it here on Craigs post, but truth is….shoot the freakin attorneys out there! It’s because you have lawyer controlled escrows. Agents should make minimum wage out there! Don’t get me started.
Sorry, for your situation…just how it is. In PA and South Jersey, it doesn’t work that way. So when I had a sale in PA where somewhere in the string of buyers and sellers, the first closing was in NY or North Jersey…it would hold up every transaction from NY to Newtown. An amazing mess all created because of the arrogance of the attorneys at your end, who can’t close two hours later if original time doesn’t work.
Like I said…don’t get me started. As to your situation and the seller calling the shots…well, somebody oughta start screaming and that somebody should be the Realtor Community, IMNSHO
Sorry, Mediaguy, I’ve got nothing to add to Ardell’s comments above (other than the shooting the lawyers bit). Your attorney should be able to explain the situation, and moreover I know nothing about NYC (other than that the Bronx is up, the Battery is down, and people ride around in a hole in the ground…)
Craig,
I think that’s a deletion, not an addition
Seriously, though…I have first hand experience that when a lawyer is always used for all closings…the consumer is greatly disadvantaged. If a closing is delayed by two hours for some reason, the attorney schedule is not “open” and it can run out two weeks. Sellers and Buyers scrambling from here to kingdom come to reschedule movers…sometimes their belongings are already in a truck. Very unfair from the consumer perspective.
Huge lawfirms may have paralegals to “move at the speed of the real estate transaction at hand”, but not often enough. Likely the reason there are not many that operate with attorney closings as the norm. But you would know that better than I.
Hello again!
Just wanted to post a quick update…
Well seems that our realtor did not put the 27th as our closing date, as we requested but did it for the 31st….sigh. Soooo…The mortage broker and realtor (who work in the same office) have been trying to get information on what is going on have been stonewalled at every turn. The other realtor (for the seller) has refused to give the mortage broker the name of the attorney handling the probate and does not return their phone calls. In frustration I called the court house and got the name of the pobate attorney and called him myself. He said the exector for the estate put the house on the market not expecting it to close so quickly and that the property had just passed the dead line for creditors to file a claim, last week. He must now inform the court of the pending sale prior to closing and that it will not happen (in all likelyhood) prior to the 31st. He also told me the escrow company were idiots for not informing us prior to signing on the 11th that there was a hold on the property and they only informed us after the signing “because they just wanted their money”. I told him our situtation and asked him if he could possiably do anything to expidite it, it would be greatly appreciated and he said he would try but not to hold out much hope. Fortunatly the broker and realtor have said that if it does not close prior to the 31st they will foot the bill for getting an extension on our apartment and pay for movers (Because as they said “they screwed up” with the closing date). I am still very irrate that the sellers realtor did not inform us of the probate status of the property when the earnst money aggrement was signed and that the escrow company withheld this information from us until we signed and paid our closing costs(the court clerk informed me this information would have been made avaliable to them during the title search), expecting that the property was closing that day. Had we known at least we could have made arrangements for extending our appartment rental and at least saved a bit more money rather than pulling the entire amount for closing from the retirement account at a substantial penelty. And so it goes….I will let everyone know what happens next and thank you all for your consideration!
Lee
Probably should add a brief addendem. The realtor and broker have graciously said they would pay for the added costs because they had not set the closing to the 27th as we requested. But for any future readers please understand I recognize that the real screw up with that was my wife and I. I did something that I have advised many people countless times not to do. I signed a legal document without carefully proof reading it first. My bad. It is true that by the time we got back to the realtors office after viewing the house it was late in the evening and we had already done two other ernest money proposals (on other properties, which were rejected) earlier that week. The realtor had the form on his computer and just plugged the information for this property in and printed it out. We gave it a quick glance and signed. Something I would have chewed a friend out for doing in the same circumstance. Well live and (re-) learn! In the future I plan to stick to my own advise and read carefully and then make sure I understand and if I don’t, find someone I trust and is competent to explain it to me and then…sign or not if I don’t like what is in the document.
I have a very general question. I have a closing date of Feb. 19 from the bank. I can close that day but the sellers attorney can’t do it because its a holiday (buying a VA foreclosure). What will the bank do if we don’t close on that specific day? Does this happen often and will be still be able to close?
The bank is probably closed too. Look at your contract. It usually has a provision that if the closing date is a holiday, the next business day becomes the closing day. It won’t say it next to the closing date. It will say it someplace else in a calculation of dates and time clause.
NY is real-estate idiocy.
Lawyers hide behind the “on or about” clause so that they can close whenever it’s convenient for them, not what the signed contracts state. I’m supposed to close Friday, I can’t get anyone to firm up a date or time. Every time I ask, I am told “this is the way NY is…”. What, incompetent and inefficient with real estate transactions? Aren’t people sick and tired of this??? Every other state (save for NJ) can close in 30 days, can close without lawyers, and can get firm closing dates!!! It’s not hard to do! Buyers say they get shafted, but hey, sellers get shafted too! I have no idea when we are to close! It can be anytime in the next 30-60 days??! And, I have no grounds to do anything, or any recourse. I basically have to sit here and wait until I am graced with a closing date. And, let’s not forget. The market is terribly slow in NY. So the attorneys aren’t exactly swamped with closings, either. Maybe buyers and sellers need to unite and form a entity to advocate for our rights!!!!
Claire,
Only North Jersey and not South Jersey. North Jersey operates like NYC and South Jersey operates like Philly/Bucks County last I checked. I think the break is around Princeton. One of the reasons no one else copied the “attorney model”. The Title Company does the closing in South Jersey and most of the rest of the East coast (no escrow).
Every seller can demand a “time is of the essence” clause from the getgo and refuse to sign a Purchase and Sale without one. But unfortunately they don’t realize the significance of the clause until after the contract is signed.
I wouldn’t hold my breath on “the rights” of consumers there. It is absolutely unbelievable that there are still areas in this Country that do not practice Buyer Agency. Unfortunately I see it going from bad to worse, rather than improving generally. No one is “behind it” on a large enough scale. Unfortunately I see Redfin making the same mistakes as those who had the opportunity 15 years ago. It is disheartening.
Good luck with your closing.
I have a closing scheduled for a specific date in April for the house I am selling however, I have yet to find a new home. My agent seems hesitant to extend my closing. Any issues with asking to extend the closing date until I find a new home? My thoughts are if the buyer agrees to this we should be ok. Any thoughts?
I sold my house in Big Bear, California. The buyers wanted a 30-day escrow which I agreed to. It was to close on April 16, 2007. It is now May 15th and escrow doesnt even have their loan docs yet. There had been two couples buying. One told the loan company not to send loan docs until they hear back from him. He pulled out a week ago, and the other couple are having the paperwork redone for them. I have incurred $2000 worth of house payments, insurance, and utilities because of all of this (its a vacation home and is empty). The financial situation is killing me. Do I have any recourse to get them to pay some of these extra costs? If you have no answer to my question, please let me know what to do. There is still no closing date at this time. I am in limbo.
Thanks.
Jerri
I live in Hudson County, NJ. I have my house under contract since Feb. 2007. The closing date on the contract was April 20, 2007. Home inspection, appraisal, fire inspection and survey were done in time. The buyer was supposed to get the mortgage commitment by April 10, 2007. There was some delay in getting the mortgage and the closing date was moved to first week on May, 2007. Me and my tenants moved out of the house on May 1, 2007. The closing couldn’t be done in the first week of May and was again moved to May 15, 2007. I was given the reason that buyer was not having enough money to make a down-payment and hence he had applied for the home equity loan on his other home (his primary residence) which had already be approved and money was transferred to his account. The May 15 closing was also postponed and the reason this time was that the mortgage broker had gone on a vacation for 3-4 days. My lawyer send the “Time is of an Essence” letter on May 24, 2007 and had suggested to close the deal by June 5, 2007. My house is vacant right now and I have already lost more tahn 4000 dollars on mortgage, tax, insurance and rental payment. I have not heard anything about the closing yet and I don’t think it will be done on June 5, 2007. What are my options? If I break the contract after June 5, 2007, am I liable for any payments to anyone? Can I get back any money I have lost as my damages? Can I change my lawyer now? Any suggestions are appreciated. Thank you.
I’m afraid I’m simply not comfortable giving you any advice at all as I have no idea about NY law. As a general matter, you can change lawyers whenever you want. They work for you, and if you want to fire one and hire another you have the right to do so, subject to the terms of your fee agreement and any outstanding amounts owed for services already provided.
WHAT ABOUT IN FLORIDA? WE HAD A TIME IS OF THE ESSENCE CLAUSE IN THE SALES AGREEMENT. WE WERE SUPPOSED TO CLOSE ON JULY 30TH. WE HAD OUR FINANCING IN PLACE AND WERE READY TO CLOSE ON THAT DATE. THE SELLER DELAYED CLOSING BECAUSE THEY COULDN’T LOCATE THE DEED OR THE ATTY. HANDLING THE DEED. WE SIGNED THE SALES CONTRACT JUNE 15TH. IT WOULD SEEM TO ME THAT THEY SHOULD HAVE HAD PLENTY OF TIME IN WHICH TO GET THIS DONE. WE CONSULTED AN ATTORNEY BUT HE HASN’T GOTTEN BACK TO US. WE WERE INFORMED THAT THEY ARE NOW READY TO CLOSE AUGUST 8TH. WE ARE RENTING AND WERE SUPPOSED TO MOVE OUT PRIOR TO AUGUST 1ST THE LANDLORD IS NOW CHARGING US EXTRA RENT IN ADDITION TO VACATION TIME MY HUSBAND AND MYSELF USED UP IN ANTICIPATION OF A FIRM CLOSING DATE. NOT TO MENTION THE EXTRA UP FRONT INTEREST WE WILL HAVE TO PAY AT CLOSING. DO WE HAVE ANY RECOURSE OR ARE WE, “PARDON MY FRENCH” SCREWED. I MIGHT ALSO ADD THAT THE HOME IS A FORECLOSURE OWNED BY PREMIER ASSET MANAGEMENT INC. WOULD IT BE WRONG OF ME TO ASSUME WE WERE DEALING WITH PROFRESSIONALS HERE WHO CERTAINLY SHOULD HAVE HAD THEIR ACT TOGETHER. THE CLOSING WAS DELAYED A WEEK BECAUSE THEY COULD NOT PRODUCE THE DEED. THIS SEEMS QUITE NEGLIGENT TO ME AS IT WOULD SEEM THEY HAD MORE THAN ENOUGH TIME TO DO SO.
Cyndi,
I don’t deal with foreclosures much, but several types of purchases are expected to sell at less than fair market value, but have more than their fair share of hiccups along the way. Short Sales, Foreclosures, pre-foreclosures and vacant corporate relocation properties are usually in this group. No seller disclosure forms, no warranties, some potential legal issues on the seller side to get through to convey the property. Hopefully the price is lower than if the property were being sold by an owner occupant. That is the general tradeoff.
“Finding” the Deed is not really the issue, as the Deed is produced and not “found”. Acquiring the legal authority to convey is more the issue.
Your signature is needed to change the close date. Any negotiations due to the change are usually done at that time. The seller needs you to agree to the extention. Once you have agreed, you lose your leverage, so trading an extention for something else is often the remedy time.
I’m sure Craig will jump in here when he gets a chance.
Cyndi:
I don’t give legal advice over the internet, particularly where the particular matter is outside the state of WA, the only state where I am licensed to practice law. I’m glad to hear you’re consulting an attorney locally — follow up with him and let him know you need some counsel immediately.
All of that said, a couple of general observations: (1) I agree with Ardell, “losing” the deed makes no sense whatsoever; and (2) I suspect you will have a hard time recovering funds to compensate you for your loss incurred by the delay in closing. I’m not familiar with the laws of FL or the specific basis for any claim, but as a general matter there is always a risk that you will lose litigation, and win or lose you will end up paying your attorney a lot of money.
Again, please discuss further with your atorney. This is not legal advice.
I’m buying a home in WA which is scheduled to close on 8/24. The lender sent the loan papers to escrow on 8/17 with instructions that they needed 24 hours to review them after signing before funding would be complete and escrow could close. Unfortunately I’m in another state and didn’t find out until it was too late. There is not enough time for docs to be mailed to me/back to escrow/back to lender, and I can’t take time off work to fly there on a moments notice to sign. The closing date is now unofficially Monday 8/27, though no addendum has been created or signed as of yet.
My question is this: I locked in an interest rate, and since then rates have gone down. The lock expires on 8/25. Since closing is now past the lock date, will the loan interest rate be re-calculated at the rate more favorable to me? At best it’s annoying that the closing is postponed - I may as well benefit from it!
Scott — I never give legal advice via the internet. Regardless, I know very little about locked in interest rates and what happens in a situation such as yours. You should communicate with a knowledgable lender or mortgage broker — even your own — to learn more. Best of luck.
I live in Virginia. A standard (form) purchase agreement contains the following language: “Settlement shall be at the office of ___ on or before _______ or as soon thereafter as title can be examined and necessary documents prepared, allowing a reasonable time for Seller to correct any defects reported by title examiner.”
Any ideas as to what a “reasonable time” is? Is this not the same situation that the NYC/North New Jersey buyers face?
PB — ah yes, what is “reasonable”… That question, by definition, has no ready answer. It depends on the circumstances of your particular case, of course, but also on the customs in your particular area (both geographic and subject) as well as how courts in your state have defined the term previously. If there are significant funds at issue, I strongly encourage you to consult a local attorney who will be able to shed light on these issues.
Sorry I can’t be of more assistance.
What happens if the buyer changes his mind on or a few days before the closing date for personal reasons and decides not to buy the house?
Terry — this is not legal advice — if you want or need legal advice consult an attorney in your area. As a general matter, if the buyer does not buy, then the buyer is in breach of contract. Here in WA, the contract usually indicates that upon breach by buyer the seller can retain the earnest money as the exclusive remedy. If that is the case with the contract at issue, then if buyer decides to not buy without a legal basis for avoiding buyer’s contractual obligation to buy, then buyer forfeits earnest money.
Some contracts, however, indicate that the seller can keep the earnest money OR seek damages for all costs incurred. If that is the case, then the seller could sue the buyer for all costs incurred. Such costs could include the difference in the sale price once seller finally sells to another buyer, the costs incurred by seller during the intervening period (mortgage, taxes, utilities, etc.), costs incurred to re-market the property, etc.
I’m in the process of purchasing my first home. The house is a bank repo through Fanny Mae. We got to the point where we were unconditionally approved by Country wide and then we were suppose to set a date with escow to close. Escrow determined that Fanny Mae didn’t have the deed to the property. So they are working on getting the deed. Does anyone know how long the deed process takes?
The last day to close according to the purchase and sell agreement is Nov 16th and the Fanny Mae put a clause in the contract that says if we don’t close by the 16th then they will charge the buyer (us) $100 a day untell the date of closing. Now if they defaulted on there end then we shouldn’t be charged right?
Our realitor wants us to go ahead and sign the closing agreement before the 16th while escrow works on getting the deed and we wouldn’t get the keys to the house yet or have tittle. After thinking about it that doesn’t sound right?
If this deal falls through we get our earnest money back right? But do we loose the appraisal money and I’m sure country wide still wants reimbursed for their work. What should I do?
Mindy — I’m sorry but I can’t give legal advice via a blog. It may be worthwhile to hire an attorney in your area. He or she could answer these questions and give you guidance on how to proceed. Best of luck.
What happens if the seller fails to put a closing date in the contract and then later tries to amend the contract in order to establish a closing date? What happens if the buyer does not agree to the amendment?
BGC — as noted in the other posts, this is not legal advice. As a general rule, where the contract does not specify a closing date, closing would have to occur within a “reasonable” time, with “reasonable” being open to pretty broad interpretation. Moreover, a contract cannot be unilaterally amended by one party. The buyer would have no obligation to agree to specific closing date after the contract was created without one. That said, the buyer would need to perform — i.e. tender payment, sign closing docs, etc. — within a reasonable time, and failure to do so would be a breach.
In our contract, we had a statement that said we should close on January 20th. THe seller is out of the country and requested to close on January 28th which conflicts with our current apartment lease. We prefer to close on Jan 25th, if we don’t we have to pay another month rent. The seller can’t do Jan 25th because they are out of the contry. We requested of them to close on February 22, then. What are our options and rights? Do they have to work with us? Or is it just their Jan28 or the highway. Are they going to say we are in breach of contract?
Please help.
Elvira — sorry, I don’t give legal advice via a blog, for several reasons. All I can tell you re some general legal principles. The contract as it exists defines the rights and obligations of the parties. You have no obligation to agree to any change in the contract terms, but on the other hand you need to abide by your obligations under the contract — as it exists — to hold the seller to their obligations. For specific advice it may be in your interest to hire an attorney.
Best of luck.
What are some considerations involved in a delayed closing? I have sellers who would like to accept an offer in January or February and close in October.
Connie — generally speaking, the primary consideration would be the risk of loss after contract is created but prior to closing. Also, the buyer’s financing could become a problem so the financing contingency is another consideration.
Connie, I agree with Craig that those are 2 major issues of consideration. You don’t mention where you are located so it’s hard to say exactly but I can comment that in some markets where prices are declining you may have issues with the appraisal - which may impact financing and the actual price your clients get for the house.
The other financing issue is if the buyer’s loan will allow for a loan rate lock for that period of time and/or the consideration of if the loan program they qualify for now is still available at the time of the closing in October. I’ve seen some serious situations arising for a lot of people that involve both of these scenarios both in and outside of WA.
What’s causing the need for the long closing?
I am selling my home myseld and everthing was ready to go for closing on monday Feb 4th. I got my hud1 from, inspection was done, appariasel was completed,etc. Today, I recieved a call from the title company saying that the buyer is switching his mortgage to another bank. I called the buyers realtor and he said they will need three more days to close and he has “no idea” why they are doing this 3 days before closing. I think they are going directly through a bank instead of through an broker to save closing costs. Should I be concerned?
A few questions I would be asking my attorney representing me in my For Sale by Owner sale is:
-did they borrower waive their financing contingency or was it deemed satisfied via the language in your contract?
- is moving lenders unusual at the 11th hour?
- how do I go about extending the contract to assist the sale in moving forward?
- what do I do if the borrower changed lenders because they were rejected for financing at the last minute or could not satisfy any lender conditions?
etc….
Zach — I am sorry but I was out of the office for the last week and a half. It sounds like your issue is now moot. As a very general rule, yes, changing the lender or otherwise upsetting the funding apple cart just prior to closing can be a problem. You have no legal obligation to extend closing and instead could declare that the buyer is in default based on a failure to timely close (subject to the possible applicability of the financing contingency). However, that would only entitle you to the earnest money (assuming you’re contract fits the “standard” model). You would probably prefer to actually sell the house, in which case you need to cooperate with the buyer.
I accidentally came to this website, because I have the same problem with the others: a closing date without a closing. I am selling my house. About 17 days ago, we received an offer (low offer, but quick closing-closing in 10 days). We accepted the offer partly based on the quick closing. We pre-signed all documents 1 day before the closing day, then was told they couldn’t close the next day because lender didn’t have enough time to prepare everything. The closing date was delayed by 1 week without addendum. Now 1 week past, we were told again the closing date need to be delayed for another week because some party was still waiting for some documents. I don’t know what’s the end of it. Is it normal? What can we do about it? Thank you in advance for any advice you can provide.
This post just keeps trucking along…
David — I have no idea in what state the property is located, and I am licensed to practice law only in WA. Plus, I do not render legal advice via a blog. That said, generally speaking, things can get a little complicated when the parties are “out of contract” i.e. the closing date has passed without a closing. If both parties are willing to continue with the transaction, then eventually it should close. If one party decides to avoid their contractual obligations at that point, then there are lots of legal issues to consider.
I can tell you that closing are often delayed due to lender-caused delays, although typically only for a day or two. Your delay seems unusually long. If you are genuinely concerned and believe the buyer may attempt to get out of the contract entirely, you would benefit from retaining a lawyer in your area at this point to assist you. Best of luck.
My “financial contingency” expires tomorrow. I can’t obtain financing and have a letter from a lender stating so (which I have forwarded to my agent and she forwarded on to the seller’s agent).
I’m trying to cover all my bases and would like to know if there are any other documentation required to cancel the sales contract?
Ken — this is not legal advice. For legal advice, consult an attorney in person or by telephone.
The requirements of the financing contingency are specifically stated in the contract. I encourage you to closely review the contractual terms (NWMLS Form 22A Para 5) to determine whether or not you have provided the documentation necessary to invoke the protection of the financing contingency (and thus to get your earnest money back).
Hello, I am happy to have found your site. I have been in contract in N.Y since July of 2007. I am in contract to purchase a home of a women with no heirs who is in a nursing home. The contract states ” to be subject to approval of a justice of the supreme court” and has a closing date of “on or about 10/5/07. My question is this, The sale has still not been approved by the court, and other contingencies like a fence being moved prior to closing have not been met. If I were to cancel the contract, would I recieve back my down payment that is being held in escrow?
Dan — If you want to see this transaction through, or if you put down enough earnest money that it is worth doing so, you should hire an attorney in your area. I am not licensed to practice law in NY and your case has some wrinkles that require an attorney’s insight.
MMy buyer won’t settle. We signed an agreement of sale a year ago, he wanted 1 year occupancy and then settle on the last month of occupancy june 1st. So he would finalize his divorce, now he’s telling me that his attorney told him not to settle because the divorce is not over. Then the new property would be fair game for his wife to go after. he wants to stay in the house as a renter, but I need the money to pay off my second mortgage on my second. he says he wants to settle in 90 days. I asked for an additional deposit which he refused. I think the guys is not being honest at this point. What would you do?
Eric — if you’re concerned, the only way to get good advice is to consult an attorney in your area. Sorry I can’t be of more assistance. Best of luck.
Hi , my buyer simply denied to buy the house on closing date , he already sent me fnancing confirmation inspection acceptance and everything was ready but at closing date he said he had some problem with his girlfriend so he can not buy our house, now i have already have leased another house for one year with 1500 $ monthly, already moved tho that place. house is vacant and is in no use , i paid fees for the lawyer for closing etc. what will be loses i can claim from buyer.also how about the deposit money of 5000$ do i have to pay it back or its mine as buyer simply refused to buy without legal reason.
Saqib — I’m sorry, but you need to consult an attorney in your area. If there is $5000 at issue — at least, depending on the terms of the contract — then it is probably worth a few hundred bucks in legal fees to insure you are handling it correctly. Best of luck.
Hi
I am buying an REO property through a bank in MA
The original closing date was delayed for 30 days (our P&S allows to extend it up to 30 days from the original date), because the seller does not have some foreclosure documents. On my end everything is ready.
If the seller wants to extends the closing date furthermore, should I request an addendum where it specified, because currently he sends me an extension request every week ?
Another question - my lock rate can expire if I extend the closing date and we also informed landlord we are going to live our current apartment on the closing date.
Is it common to request from a seller to get compensated for this financial losses , do they usually compensate ?
Rom — I apologize, but I have no idea about either the laws or customs in MA. If you’re concerned I suggest yopu contact an attorney in your area.
Hi. The situation I have is that on the day of closing our buyer declared that they would not sign because their spouse who they were in the process of divorcing would not sign a quit claim on the house. All of the contingencies were met and the deadlines had passed. We extended the closing for a period to allow the buyer to attempt to have the quit claim signed, but this didn’t happen so the deal fell through. All of the financing was in place on the closing date. The buyer has now apparently engaged a real estate attorney on the subject of the earnest money deposit. We have another offer, but have lost a month, have had to pay another mortgage payment, and the new offer is for significantly less than the original contract. I was curious about what the Washington State law on the earnest money deposit says under these circumstances. Thanks.
Rom,
I can’t answer about the law, but in common practice an REO or Short Sale should be sold at discount to fair market value to compensate for their quirks. Yes, closings are extended and extended and weekly is good as it keeps everyone short term motivated as to close date. I believe you have the right to not extend, so if you want to ask for something in exchange for the extension at this point, no harm trying far as I can see.
Jimmy,
How much is the Earnest Money? The answer in WA sometimes depends on the amount as in small enough for Small Claims Court? A seller can immediately file in small claims court for the Earnest Money to be ordered to them by the Court if the amount is within the limit. Escrow will have instructions for you to follow.
I did this once, but Craig can tell you if my way is illegal here. I was the seller. I released the first contract but NOT the Earnest Money. I accepted the 2nd contract and closed on the 2nd contract. I would not release the Earnest Money and claimed it against the shortfall between the two sale prices (my 2nd contract was also less than the first).
Is the amount of Earnest Money higher than the difference between your two contracts? It doesn’t really matter. Just curious.
Hi Ardell. Thanks for the speedy response. The Earnest Money is $5,000. The second offer is $5,000 less than the contract that fell through. We did submit a failure to close form on the original contract and have just put the house back on the market after giving them an extension on the closing date.
Ardell; one more thing were you successful in your claim for the earnest money?
They gave it to me before it got very far. They just changed their mind. I felt badly because it was really their agent’s fault. They told her they wanted new construction, but she didn’t want to wait for something to be built to get paid. She pushed them into buying mine that was only 1 year old, but they really wanted new. I was already in escrow on my new house, so I had to drop the price by the amount of the Earnest Money to get it back into escrow fast. I ended up closing on exactly the same day with the second buyer that the first one would have closed on.
There is no “law” Jimmy that will make someone give you that Earnest Money. I’m 99% sure the best way is to go to small claims court and make your case for your loss and hardship. If you let it run its course an attorney will be assigned and all charges will come FROM the Earnest Money even if you win.
Seems to me that there is a special provision regarding Earnest Monies and Small Claims Court. I think it doesn’t cost you anything, so check with Escrow for instructions rather than simply filing without those instructions.
Let us know what happens.
I’m sure Craig will chime in here as well.
One more thing Jimmy. Often it is said that the seller can’t sell without releasing the money as the buyer can cause trouble in the second sale. I turned that around and threatened to get a quick judgment that would impact their being able to close on the new construction house. Lenders don’t like to fund if the buyer has a judgment in their name. I turned the tables on them.
But yours could be as simple as small claims, though don’t expect it to be all about the contract as small claims people don’t do real estate much. From what I observed, the sad story won. So don’t get all black and white “it’s mine” about it. Show how you were damaged even though the contract says it’s not about the damages.
This is just friendly advise, not “legal” advice
Consult an attorney like Craig…outside of “a blog”.
Jimmy — sorry for the delay! First, note that this is not legal advice. If you want legal advice, give me a call and we can discuss the terms of my retention (or contact another attorney).
Based only on what you’ve told me, it sounds like you have a very good claim on the earnest money. Most contracts in the “default” paragraph of the first page have the “forfeiture of earnest money” checked. If that is the case, then your sole remedy against the buyer is to retain the earnest money. If that is NOT the case, then things get a little more interesting.
Assuming that is the case though, you can certainly go the small claims route. Recovery is limited to $4k, though, so you will not get the entire sum. Plus, the contract includes and attorney’s fees clause. So, if you have to sue to enforce your rights under the contract (i.e. if you have to sue to get the earnest money upon buyer’s default) and you prevail, the buyer will also be liable for your attorney’s fees and costs incurred.
Again, give a call if you would like to discuss further!
Thanks for the input Craig; I very much appreciate it. Yes; we checked forfeiture on the first page and I also noted the attorney’s fees clause. I was curious whether we have to wait for 30 days (with the broker holding the money) before going to small claims; or is the event that happens after 30 days a different court? Also, is there an issue with us selling the house to another buyer whilst this issue is ongoing? I will discuss with my significant other to decide where to go from here. Thanks again!
my question is, does the mortgage 3 day right of rescission is applied after signing documents at closing?
unhappy buyer, the 3 day right of rescission only applies to refinances, not mortgages used for purchasing a home. With a refinance, three “postal days” must pass after signing before the loan can fund. By your alias, I’m assuming you’re buying a home and not refinancing?
I am in NJ. I am selling my house and the closing date was last week. I didn’t show up because my attorney said all I had to do is sign the papers beforehand. My agent did not show up either. Then at the closing the buyer found the property tax is different from what I put in listing. There is an abatement situation that I was not very clear. It turned out after the abatement the tax is actually less than what I put in listing. Now the buyer wants to cancel the contract, saying that the tax situation is different so the contract is void. Also his attorney said because we didn’t show up at closing, they didn’t get needed explanation so they chose to cancel the contract. But in fact the tax is less and is to his advantage! Is the buyer in the breach of the contract in my case? I want to know if I can retain the deposit money because my mistake does not have any negative impact on the buyer, so I think I fulfilled my responsibility in the contract and the buyer should not cancel it. Thanks for your help.
Ricardo: I am not licensed to practice law in NJ so I really cannot shed any light on your situation. Why not ask your attorney about this question? Sorry I cannot be of assistance.
My husband and I received an offer on our condo and we lowered the price, but asked the buyer to closer eariler then she originally wanted. We received the accepted offer back, but was not told that the date of closing was not changed back to the original (July 25th). We have already moved forward w/ the terms of the contract for it to close thinking that it was closing next week…but my agent called today and said the buyers lender will not allow them to close until July 25th. That is the date the buyer changed the contract to. We have already paid for several repairs that needed made to our home and sold all the furniture that was in the home. We also allowed the home inspection and appriasal to be completed….does this mean there is an applied accepted contract? or do we have to write the extension in a contract
Heather — sorry, I don’t dispense legal advice via a blog, in part because I have no idea if you’re in WA (where I can practice law) or somewhere else. If you’re concerned about the existence or terms of the contract, I suggest you contact an attorney in your area.
Craig,
I we bought into a vacation development here in Washington State, almost 2 years ago, and the original closing date was January 3rd, 2008. We have since signed Addendum/Amendments to extend closing to April 25th, 2008, and July 30th, 2008. We now have received another Addendum/Amendment to close on August 8th to sign. Yesterday i received a vm from the developer that the home will not be completed until August 15th. Our situation at this time is that we cannot get financing for closing on this. I called our original sales rep 3 weeks to to verbally let them know this. I was told that the developer expects us to close on this deal (we did not sign a financing contingency). I was also verbally told that we could try to assign the p & s without advertising it specifically. I have tried to find someone to take over out p & s, and i do have someone interested in doing so. The p & s is not an MLS contract, but one prepared by an attorney firm here in Washington State. There is this clause for Closing. “This sale shall be closed on or before (January 3rd 2008), provided seller reserves the right to accelerate or extend closing for up to an additional 30 days without fee or penalty. “Closing” means the date on which all documents are recorded and the sale proceeds are available for disbursement to seller. Purchaser and seller shall deposit with closing agent all documents and monies required to complete this sale in accordance with this Agreement” Under the General Provisions paragraph it simply says “Time is of the essence”. We did provided $42,000 in Earnest Money at the time of contract (10%). All i care is that we get this $ back. The project has had it’s share of problems with getting things done on time. At the time in January, there were financing programs that would of allowed us to close at 90% financing if we need to at that time, not there are not for our situation. Do i have a good case to get back our Earnest $ if we do not sign an extension and the property is not finished and July 30th passes? due to the “time is of the esssence” clause? The part about the additional 30 days for the seller to accelerate or extend sounds a bit tricky though.
Thanks
Steve — I cannot give legal advice via a blog. This is not legal advice, and you are not my client.
That said, based on what you have written, it sounds like you should be able to get the $42k back, but to have an informed opinion (and to counsel you as to how you should go doing so) I (or any other attorney) would need to review the contract. I encourage you to retain an attorney before you sign anything else. I would be happy to assist — link to my web page (by my picture to the right at the top of this page) and give a call if you would like to discuss further. If I don’t hear from you, best of luck.
Thanks Craig: for you and anyone else who will see this. Has anyone heard of a seller using a no solicitation clause in a purchase and sale like this one below? I know covenants can dictate certain actions and use with the property, but not allowing a buyer after closing to advertise and sell their property?
“Without the express written consent of Seller (which consent will not be unreasonably withheld), Purchaser will not advertise or solicit offers from the public with respect to the resale of the property by the purchaser in any manner before the Closing Date, or within six months after Closing Date, including through use of any signage within a 1,000 foot radius of the Resort Development”
I have a question
My husband and I are buying a house in NY we agreed on a closing date of July 18th and the closing date is on the contract and we find out today 2 days before the closing date that the sellers of the house have left town and the closing date is delayed…can the seller leave town and make the closing date delayed with out telling the buyers? Just wondering about this
Betty,
NY is different than most of the Country. They usually do not have a “time is of the essence” clause. See if you can find that in your contract. Often the “time is of the essence” clause is invoked after the estimated closing date is past.
Betty — this is not legal advice. For legal advice, consult an attorney licensed to practice in NY (I am not).
If a client of mine asked this question, I would encourage her to make sure that she does whatever is necessary to close on the closing date (such as depositing all funds with escrow and/or signing all loan documents so that the loan can be funded on the closing date). By performing her obligations, she would clearly preserve the ability to sue the seller for failing to perform his.
Again, if you have a question, its worth it for a quick legal consult in your area so you can get legal advice.