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Seller Cancels Contract 7 Days Before The Closing Due To Late Escrow
Q: Hello, we have a contract which is due for closing in 7 days. Seller was trying to find a way out of this contract for the past few days. They requested the escrow letter only 10 days before the closing and they cancelled the contract and would like to hold the deposit because escrow did not came in 3 days period. Buyer ordered all title work and lien search and ready for closing. It's a very weird situation.
A: @Marcielana - GREAT question... and not an easy one to answer. Let's start with a disclaimer - "I am not an attorney and cannot give legal advice. For legal advice, please contact a licensed attorney in your area."
We're really lacking some details here. Without seeing a copy of your purchase contract, we can only attempt to guess the details, which is no good... but I'll list my assumptions along the way.
For starters, contract dates matter... no, wait... they MATTER. I can't speak for the real estate process in Florida as I'm not licensed there, so I will base this on Massachusetts.
When we make an offer, we include a few key dates:
The date the offer expires
The date Purchase & Sale must be executed by
The date a loan application must be submitted by (if applicable)
The date a commitment letter is due (I'm assuming this is akin to your "escrow letter")
The date of closing
We monitor these dates closely and strive to hit all of them early or on time. It's not always possible, so we keep all parties informed and send out an extension in advance when appropriate. Is the seller obligated to agree to an extension? No... not necessarily.
If it's something outside of your control (lender's obligation to hit the commitment date, for example), as long as you fulfilled your obligation (submitting your application on time with all documentation), then it would likely be considered "bad faith" for the seller to pull the plug. It sounds like you may potentially be dealing with a "bad faith" situation.
Do you have proof that the seller has been attempting to exit the deal? Have you been discussing this concern with your agent and/or attorney (I'm assuming you have an agent and/or an attorney)?
If I assume you have an attorney, then a call to your attorney is in order, assuming you still want to move forward. Whether or not the seller is allowed to keep your deposit is an oft disputed item. This is why I said early on that dates MATTER. You'll need to consult your attorney to see what your legal standing is. Courts like to see contracts upheld and they will closely look at the obligatory dates and each party's actions. I hope it doesn't get that far. Often times, a letter from an attorney to the other party will be enough to knock some sense into the parties.
Also, when you execute a P&S, you create an "equitable interest" in that property, and those laws may be different from state to state. If you feel that your interest is in dispute, you may be able to have an attorney place a lien on the property for you, effectively "clouding the title" and prohibiting the opportunity of the seller to convey the property to another party until your claim is resolved.
You can see the full thread here, on Zillow.