Westcoe Realtors, Riverside California…Ok…you are excited, you are pumped. You have just bought or sold a home, you enter the escrow period, and life is good. In a certain amount of time when your escrow closes, (generally between 30 and 60 days) you will either have some cash if you are a seller, or some new walls and the pride of home ownership if you are a buyer. What could be better? However, life being what it is (especially real estate life), WHAT HAPPENS IF THE ESCROW DATE IS NOT MET, AND EVERYTHING RUNS OVER?
Well, it depends. I hate to be vague, but every situation is different, so what I will cover here is the general answer to some general situations. Also, please accept the standard caveat that Westcoe Realtors Inc, is a real estate company and not licensed to practice law…but we have been around a long time and can certainly give you the benefit of our real estate experience as it relates to real estate issues.
So…what happens if you run over your escrow closing date?
The first situation is very easy. If both buyer and seller still want to complete the transaction, then everyone continues upon their merry way, and you close the escrow as quickly as you can. If the delay is only going to be a few days, there should be nothing to sign, no additional paperwork, and it just closes late. If the delay is going to be longer than about a week, then it is best to have the escrow company prepare an amendment extending the escrow to some point in the future agreeable to all parties. Remember, in this situation, all parties still want to proceed, so the solution is fairly simple. Close in few days, or extend with an amendment to cover the additional time needed.
But what if, when the closing date rolls around, one of the parties wants to cancel the escrow…and wants to use the failure to close on the appointed date as the reason for the cancellation? Now what?
Well, that complicates things a little, but the answer is still simple.
First, understand that the escrow period you set when the contract was agreed upon between the buyer and seller is not set in stone. It is merely a date upon which all parties are striving to complete the transaction. While there are exceptions to this (and those exceptions would have to be noted up front in the contract), the mere fact that the escrow has failed to close on its appointed date is not grounds for “divorce”. So what happens?
In the case of one party wanting to cancel and one party wanting to continue, the party who wants out “must give the other party a reasonable time to perform”. That is the law…and the law is vague on purpose because each transaction is different. How much time needs to be given? That is the magic question. As I said, and as the law reiterates, each situation is unique, so the specific answer depends on who is causing the delay and why.
Has someone dragged their feet, made things slow down on purpose, wasted time, refused to cooperate, etc? That is a mitigating factor in how much time needs to be given to close. Or, are the delays no one’s fault, but simply the normal operating issues that can affect a transaction…the appraiser was late or needed an appraisal review that took an extra week, the termite work was not completed in time, the home inspector found repairs that took longer to fix, etc. As you can see, there are as many reasons an escrow could delay as jelly beans in a jar.
The bottom line here is that before you can set a “reasonable time to perform” you need to know why the delays occurred, and then ascertain where to go from there…BUT YOU SIMPLY CANNOT “BLOW-UP” AN ESCROW JUST BECAUSE SOMEONE IS A LITTLE LATE ON THE CLOSING.
As a final note, as I mentioned at the top of this blog, sometimes there are exceptions to the general rule I have just outlined. IF…when the contract is being negotiated, and the close of escrow date is REALLY IMPORTANT TO EITHER PARTY…so important that if the date is missed, someone can’t/won’t want to continue with the transaction, then that needs to be noted at the outset…and that notification now becomes “the reasonable time to perform” notice. In other words, you are giving your notice up front, instead of when the time period is not met. Then you would be OK to cancel if the escrow fails to close on time.
Hopefully this will help with some of your general questions about this portion of a transaction, and guide you a bit if you ever find yourself in this situation.