Home Selling in Los Angeles>Question Details

Montauk, Home Seller in Los Angeles, CA

What rights does the seller have when the buyer requests an extension on the escrow?

Asked by Montauk, Los Angeles, CA Thu Jul 9, 2009

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Montauk:

The word “right” is a bit misleading – “right” and “correct thing to do” are often two different things.

Your “rights” are defined by the contract – they do certain things, you do certain things, both are rewarded. Their reward is a house, your reward is cash. The contract simply specifies what needs to be done and at what specific time to ensure the reward happens at the end for both parties. Anyone can ask for changes in the contract as they go along – as long as both parties agree, then the contract keeps going forward. If either party either (1) fails to keep a part of the contract or (2) changes part of it without the other’s consent, then the possible outcome is the loss of the reward.

If the buyer asks for an extension, there is usually a good reason. Example: they need more time to get their loans docs into escrow, get the loan funded and close. If you agree and grant an extension, things can proceed and the reward still happens for both parties. If you don’t agree, then you technically have the “right” to cancel the contract and move on. Is that a wise thing to do? The “correct thing to do”? Not normally. Both parties lose.

Some questions:

Q: Is it aggravating that the buyer is not going to close on time?
A: Definitely.

Q: Is the buyer doing it on purpose?
A: Not usually.

Q: Is there any benefit to “punishing” the buyer for their inability to get closed on time?
A: Not usually.

Q: Can you seek damages if you have been harmed by the failure to close on time?
A: Maybe. You would have to make sure you can demonstrate actually damage. Example: cancellation of a moving contract with the resulting loss of deposit.

Q: Can you keep their deposit and go and get another buyer?
A: Maybe. If contingencies have been removed and you want to play hardball, you can have your Realtor submit a 72 hour “Notice To Perform”. If they fail to close within the 72 hours, you may have a right to cancel the transaction and get their deposit. Is that a good move to make? Personal opinion: only in extreme circumstances where you believe they will not actually close at all under any circumstances. And then you have the hassle of going back on the market and so on.

Q: What can you do to strengthen your hand a bit?
A: If they ask for an extension, you can also ask that they increase their deposit and, in writing, specify that the deposit become non-refundable after a certain point in time. That provides the buyer incentive to ensure that they keep things moving forward.

Hope this helps – let me know if you have any additional questions.

carl@carlmedford.com
Web Reference: http://www.carlmedford.com
2 votes Thank Flag Link Thu Jul 9, 2009
Did you do this transaction through a Realtor? Your contract should be spelling this out? Your agent should be advising you according to what the contract says?

If you did the sale on your own and the contract doesn't allow for any solution but you have a buyer's deposit in escrow, consult an attorney. You want to make sure you are not getting entangled in a legal dispute.

In General you may wish to give the buyer an extension to close on the purchase. It all depends on your original contract and your motivation to sell.
1 vote Thank Flag Link Thu Jul 9, 2009
The buyer should as for the extension of escrow in a timely manner, it is very common for the seller to agree to an extension, but it all depends on circumstances. In your contract it gives you potential situations where the seller has the right to cancel.
0 votes Thank Flag Link Thu Jul 9, 2009
Montauk
I would suggest talking with your Realtor, if you have employed one in this purchase. Most the advice in Carl's post refers to items relevant to a purchase contract used by Realtors.

You should know that in the current financial market it is not uncommon for a buyer to have lender problems. When you have professional representation one of the roles is to monitor the buyer's progress toward obtaining financing.

What concerns me is what other details you might be missing if you need to ask Trulia a question like this one.
0 votes Thank Flag Link Thu Jul 9, 2009
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
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