Seller taking on another contract while escrow as not closed
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Mike CumbieBusiness Member
REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votesI'm sorry but I fully disagree with most of your premise.
You say deadlines are deadlines, but then say that "too bad for them I was late and they get nothing". "I would agree to pay if I was even later than the lateness I was, but not before". Either you care about deadlines or you don't. You care about the contract you entered into or you do not.
You state that you held up your end of the bargain and closed when promised (the date you decided on your own to promise, not the agreed upon date because you missed that)... But you were late, it was your side that failed. You choose the lender and made promises. You were unable to meet your obligations and somehow they should just wait it out and hope you can actually close some day with no extra guarantees from you.
You would have agreed in the beginning, but you didn't understand it, so he is just out the holding costs. Because you didn't understand it. Yes we are all in Real Estate together, but you refusing to meet your deadlines, refusing to make good faith adjustments when you fail then blaming them for being unprofessional, just strikes me as you do not understand.
As an agent if you represented a seller and the buyer was a week late and going to be even later (and you are not sure if they will ever actually close because they can just tell you anything without per diem or extra EMD), would you roll over and tell your client "well tough" or would you get them something for the failure of the other side to meet contract or at least a guarantee to protect them?
Lastly they did not "confirm that they could not move forward in Texas", they simply made a business decision not to walk away from you and take a loss on your inability to meet your deadlines. I'm not trying to beat you up, but if you continue with the way you are thinking you may lose out on a "homerun" of a deal in the future. Even worse you may have a client lose out on a "homerun" deal and when they start blaming you for a failure to perform "reasonable care" you could be liable.
Good luck in your investing and your business.
28 Replies
- Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes8y
@Minh Le If you are past the closing date specified in the contract, and you don't have an extension, the contract is no longer enforceable. Your best bet is to give the seller some concession in order to get them to extend.
Also, get a new lender!
- 8yMike CumbieBusiness MemberREALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
Small delays are not enough to kill a contract (in my area at least) but if you are going over a week that may be enough in yours for them to kick you to the curb. You signed a contract that said "I can have all my ducks in a row by August 15th" and then you failed to meet the timeline. The lender portion is your responsibility, if the lender just decides tomorrow they change their mind, it is not the sellers problem to deal with.
I would agree with @Jason Hirko find something to keep them sticking with you if you are sure it is going to close.
- Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes8y
@mike
@Mike Cumbie I've been in this position before and would offer to put down some silly extra EMD to get the seller to stay in contract. @Minh Le presumably, you've lost your earnest money deposit if you don't close, so you should consider that as well. I'd call the seller, tell them you'll put $10k hard if they extend another week (but only if you're sure you can pull it off)
- 8yMinh LePearland, TX · Member since 2017 · 67 posts · 21 votesOP
Thank you @Jason Hirko and @Mike Cumbie for chiming in. As I've come to learn, in the world of real estate, closing delays does happen quite a bit. This was one week, and while I understand investors have holding costs and so forth, one week's worth of closing cost shouldn't make or break the Seller. This is actually the first time I have came across a Seller having issues with a delay in closing, and wanting to impose a per diem for each day past the original close date.
And what would that do? Wouldn't it just come back to me anyways in the form of an earnest payment credited to the purchase of the property?
Regarding the lost of earnest money, as I've understand, in order for the money to be released from Escrow, I would have to sign off on it as well. Otherwise, it would just sit in Escrow.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes8y
Read your contract carefully. Its not uncommon to have the EMD as liquidated damages if you default on the contract, and you are in default.
District Invest Group546 Reviews - Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes8y
@Minh Le If you don't close, title will ask you to sign off on the release of earnest money as a courtesy. The seller will get your earnest money if you breach the contract. If you used the TREC contract, there's a clause about how "Time is of the Essence" meaning that 'it's only one week late' is not a valid argument. And yes, if you close, your EMD would just be credited to you at closing - so it doesn't cost anything to you if you close, but it gives the seller reason to stick in contract with you. That's why I have done it in the past.
Best of luck!
- 8yMinh LePearland, TX · Member since 2017 · 67 posts · 21 votesOP
@Jason Hirko definitely will be closing tomorrow, and that has been communicated ad nauseum to the Seller, yet Seller still insisted on the per diem; and at this point, it would only delay closing, which is counterproductive to what we're trying to achieve.
But my original question is, would Seller be able to take on another contract, if the current contract/escrow is not closed?
- Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes8y
Originally posted by @Minh Le:
@Jason Hirko But my original question is, would Seller be able to take on another contract, if the current contract/escrow is not closed?
Because there is no contract. Contract expired last week. Seller is released from the previous contract for failure of buyer to perform. Is your realtor involved?
- 8yMinh LePearland, TX · Member since 2017 · 67 posts · 21 votesOP
Originally posted by @Jason Hirko:
Originally posted by @Minh Le:
@Jason Hirko But my original question is, would Seller be able to take on another contract, if the current contract/escrow is not closed?
Because there is no contract. Contract expired last week. Seller is released from the previous contract for failure of buyer to perform. Is your realtor involved?
I guess the better question would be, would any Title Company be able to close on the new offer while my current Escrow/contract is not yet closed? From researching, all signs point to "no", so I wanted to get confirmation from people who have had this experience.
- Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes8y
@Minh Le Any title company would close his new contract, as it is the only enforceable contract. Call the title company and they will tell you the same thing.
- Realtor · Palmdale, CA · Member since 2018 · 6 posts · 4 votes8y
Hi @Minh Le,
It totally depends how the purchase agreement was structured. In California, for example, most agents use a Residential Purchase Agreement issued by the California Association of Realtors. This particular agreement has a performance clause in it.
In the abovementioned agreement, should the buyer or seller not perform a duty within a given amount of time, the other party must first issue them what is known as a Notice to Perform (CAR Forms NBP and NSP). This notice gives the party that is potentially in breach a minimum of 2 days to meet the obligation. If the responsibility is not meet within the minimum 2 day period, the other party then reserves the right to cancel.
The California Association of Realtors’ Residential Purchase Agreement states the following:
“NOTICE TO BUYER OR SELLER TO PERFORM: The NBP or NSP shall: (i) be in writing; (ii) be signed by the applicable Buyer or Seller; and (iii) give the other Party at least 2 Days After Delivery (or until the time specified in the applicable paragraph, whichever occurs last) to take the applicable action. A NBP or NSP may not be Delivered any earlier than 2 Days Prior to the expiration of the applicable time for the other Party to remove a contingency or cancel this Agreement or meet an obligation.”
If a provision like this exist in your purchase agreement, the seller would first need to provide you with the performance notice, wait for the allotted time to pass, and then cancel the agreement. Until that point, depending on how your agreement was structured, your contract may still be valid.
It might be a good idea to revisit the purchase agreement just to be on the safe side. Best of luck to you!
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes8y@Minh Le You just discovered why it’s important to stay on top of your lender. I typically call my lender almost every day or at least every other day the week before closing to make sure it stays on track. Same goes with title company. There’s a lot of moving parts to real estate transactions and you gotta stay on top of them
- Investor · Pearland, TX · Member since 2017 · 67 posts · 33 votes8y
@Minh Le that's an unfortunate situation and hoping it works out for you. Almost begin to sense seller may have a 'better' higher offer?
Another thought, if seller went and opened title elsewhere, how could that (new) title company know any of the history around your contract unless the seller is upfront and honest with them?
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes8y
@Minh Le what damages is the seller looking for?
- Richmond, VA · Member since 2016 · 215 posts · 129 votes8yI find this interesting. When I bought my personal residence, the seller had an undisclosed lien that took forever to remove. I was ready to walk over the situation and was told I was stuck in the contract as long as the seller was making a good faith effort.
- Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes8y
@Mark H. Yes, your contract called for that....a period to clear the title issues.
@Minh Le Yes, your seller can sell to someone else, you didn’t close by the closing date and he has no obligation to extend it.
As for the EM, if you are in default, as per your contract, and you refuse to sign the em release, he can either force arbitration or sue you, as per the contract, you’ll lose and pay his attorney fees/costs on top. I love it when someone is in default and says “I just won’t sign the release, nothing they can do”.....it is an indication of being clueles.
- Investor · Riverside, CA · Member since 2015 · 280 posts · 111 votes8y
Originally posted by @Minh Le:
Hi all,
I have everything in place to close on a property purchase, however, Seller is wanting to take on another contract, because closing was delayed by a week, and we did not have an amendment to officially extend the close date. Is that possible?
The delay was out of my hands, as Lender did not get back to me until recently; and I have provided everything that they asked for, every step of the way, in a timely fashion.
Regards,
Minh
Hi
Did the seller agree to your week extension /delay? They should of sent you a notice to perform. Did you get that?
We’re your respective agents in a coma?
If they were not informed and/or they did not agree you’re really the one in breach. I personally can’t imagine ending a almost closed deal to start with a new offer. Unless that offer was just insanely good (which means absolutely nothing as lots ignored people use a high offer to get the houseboat under contract then beat the seller over the head with bs to lower the price. )
I would call the seller and explain what happens and send the extension for closing.
Btw I don’t think the seller can take another offer unless it’s a back up offer. But you can’t have one house under contract with two buyers
- 8yMinh LePearland, TX · Member since 2017 · 67 posts · 21 votesOP
Hi all,
Just wanted to provide an update. We closed last Friday as communicated and promised to the Seller.
@Rob D. I am an agent and represented myself in the deal. As mentioned previously, I have come to learn that closing delays are not uncommon in the world of Real Estate, especially with retail buying involving a lender. I was shocked when my brokers (been with two different brokerages) mentioned this, because in my corporate job deadlines are deadlines; I can't call my Finance Committee and ask them to push back a meeting because I do not have the presentation prepared.
This per diem concept was news to me, as I haven't experienced it previously in other transactions that had minor delays. Usually if there is a delay, it gets communicated between agents, and most of the time we do not even draw up another amendment to extend the closing date, unless the buyer's lender is asking for it. Per diem seems to be unique in transactions involving investors, as they want to cover their holding costs. I understand that, but my closing was delayed by one week, and it was communicated by me and the mortgage broker, multiple times that we will close at the specified date; yet the Seller still would not relent on the per diem. I understand imposing it beyond that point if I still was not able to close as communicated. I even drew up an amendment, stating that I will pay a higher per diem rate than what was asked, dating back to the original close date, and Seller refused.
We did not have a formal signed amendment to extend the close date prior to going into closing. I went to the Title Company and closed as scheduled, holding up my end of the bargain. Seller opted to close remotely, which was also something new to me, and he did not sign initially. In the end, Seller's assistant called me up on the last hour before COB, and we came to an agreement with me paying a small amount, in good faith, and to have Seller execute the closing docs and also sign off on the amendment to show the extended close date. This coincidentally became the final piece that the Lender had requested after I have already closed on my end.
- 8yMinh LePearland, TX · Member since 2017 · 67 posts · 21 votesOP
I could have easily agreed to the per diem in the beginning, but at the time, the concept was foreign to me and I objected based on my own experiences and my colleagues' experiences with closing delays. During the week of the original close date, I spoke with the Seller to provide updates and communicated the delay, due to Lender still going through the underwriting process. That was when Seller asked for the per diem, and when I challenged him, he started threatening me by saying things like, "You do not want to play with fire, or you'll get burned", and "Don't poke the bear". I found it very unprofessional, so of course I did not agree to Seller's terms.
We are all in this Real Estate business together, and there is no reason to treat each other unprofessionally. We should help each other to achieve that common goal. When Seller's assistant reached out to me, he commented that they have other offers that were higher, but they cannot move forward because they were "stuck" with my contract; thus confirming that Sellers are unable able to take on another contract, if the current contract has not be resolved, at least in Texas.
- 8yMike CumbieBusiness MemberREALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
I'm sorry but I fully disagree with most of your premise.
You say deadlines are deadlines, but then say that "too bad for them I was late and they get nothing". "I would agree to pay if I was even later than the lateness I was, but not before". Either you care about deadlines or you don't. You care about the contract you entered into or you do not.
You state that you held up your end of the bargain and closed when promised (the date you decided on your own to promise, not the agreed upon date because you missed that)... But you were late, it was your side that failed. You choose the lender and made promises. You were unable to meet your obligations and somehow they should just wait it out and hope you can actually close some day with no extra guarantees from you.
You would have agreed in the beginning, but you didn't understand it, so he is just out the holding costs. Because you didn't understand it. Yes we are all in Real Estate together, but you refusing to meet your deadlines, refusing to make good faith adjustments when you fail then blaming them for being unprofessional, just strikes me as you do not understand.
As an agent if you represented a seller and the buyer was a week late and going to be even later (and you are not sure if they will ever actually close because they can just tell you anything without per diem or extra EMD), would you roll over and tell your client "well tough" or would you get them something for the failure of the other side to meet contract or at least a guarantee to protect them?
Lastly they did not "confirm that they could not move forward in Texas", they simply made a business decision not to walk away from you and take a loss on your inability to meet your deadlines. I'm not trying to beat you up, but if you continue with the way you are thinking you may lose out on a "homerun" of a deal in the future. Even worse you may have a client lose out on a "homerun" deal and when they start blaming you for a failure to perform "reasonable care" you could be liable.
Good luck in your investing and your business.
- Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes8y
Each party has rights and obligations...they're not just guidelines. A week delay, regardless of the reason, is an unreasonable delay. Assuming you used the TREC / TAR contract form, the seller can claim you've breached the contract and terminate thereby allowing him/her to accept another contract. Seller should sign a release of earnest money before moving forward. Also keep in mind that the seller can accept a back-up contract even while your contract is in place...it's not that uncommon and it's perfectly legal.
- 8yMinh LePearland, TX · Member since 2017 · 67 posts · 21 votesOP
Whoa @Mike Cumbie, I appreciate your input, but you're comparing apples to oranges. Yes, I work effortlessly to meet my deadlines in my job, but I've also come to understand that closing delays happens in Real Estate. I understood the contract that I was entering in, and I also understand that there are a lot of moving pieces in play, of which I am unable to control; hence delay in closing happens. Let's not get it twisted to say that I did not try to close on time as I followed up with the mortgage broker constantly, and provided documentations as requested quickly. For the most part, it was out of my hand. You used the term "refuse" like I asked the Lender to delay the closing process on purpose.
You seem to be well-versed in the Real Estate business. In the years that you represented Buyers, are you saying that every one of your buyers know exactly which lender they are doing business with and know exactly how their lending process is going to play out? And in instances where closing gets delayed due to the lender, do you force the Buyers to pay a per diem to the Seller? If so, are you acting in your Buyers' best interest by do so?
I commented that Seller was unprofessional, because it was exactly that. How would you react if I say, "Mike, you're poking the bear. Don't be playing with fire, because you are going to get burned". Are you going to roll over and say "Sorry, Master Bear"? Mind you, the Seller was an agent/investor himself, so that is definitely not how you interact with other agents.
- Investor · Riverside, CA · Member since 2015 · 280 posts · 111 votes8y
Originally posted by @Minh Le:
Hi all,
Just wanted to provide an update. We closed last Friday as communicated and promised to the Seller.
@Rob D. I am an agent and represented myself in the deal. As mentioned previously, I have come to learn that closing delays are not uncommon in the world of Real Estate, especially with retail buying involving a lender. I was shocked when my brokers (been with two different brokerages) mentioned this, because in my corporate job deadlines are deadlines; I can't call my Finance Committee and ask them to push back a meeting because I do not have the presentation prepared.
This per diem concept was news to me, as I haven't experienced it previously in other transactions that had minor delays. Usually if there is a delay, it gets communicated between agents, and most of the time we do not even draw up another amendment to extend the closing date, unless the buyer's lender is asking for it. Per diem seems to be unique in transactions involving investors, as they want to cover their holding costs. I understand that, but my closing was delayed by one week, and it was communicated by me and the mortgage broker, multiple times that we will close at the specified date; yet the Seller still would not relent on the per diem. I understand imposing it beyond that point if I still was not able to close as communicated. I even drew up an amendment, stating that I will pay a higher per diem rate than what was asked, dating back to the original close date, and Seller refused.
We did not have a formal signed amendment to extend the close date prior to going into closing. I went to the Title Company and closed as scheduled, holding up my end of the bargain. Seller opted to close remotely, which was also something new to me, and he did not sign initially. In the end, Seller's assistant called me up on the last hour before COB, and we came to an agreement with me paying a small amount, in good faith, and to have Seller execute the closing docs and also sign off on the amendment to show the extended close date. This coincidentally became the final piece that the Lender had requested after I have already closed on my end.
You’re throwing out what I call typical agent speak. From your original post you made it seem like you could/did not close by the closing date, needed to push back a week, the seller started making noise and wanted out of the deal because they had better offers.
Now you're saying deadlines are really deadlines as far as you’re concerned but when it comes to real estate it’s ok it’s just the nature of the beast so the seller needs to understand that. You’re talking out of both sides of your mouth. Unless I’m mistaken, your original post said you had to push back your closing but you did not communicate to the seller. He just loses all that time due to your/your lenders incompetency if you can’t close or need extensions. Yes he should get money for your mistakes. Your lender should of been able to tell you when you can fund/close and stick to that date. You did not say there was full communication of your closing push back to the seller.
Did you ever think that the seller was mad because you were wasting his time and possibly he could of been losing out a deal he could of had going which you spoiled or made him look unprofessional by your delayed closing? Now you want him to be “professional” because “we’re all in this together”. No we’re not all in this together. Were in this together as far as this transaction is going on. And the seller most likely decided they were so far into the deal it wasn’t worth starting over with the higher price.
Your being an agent imo makes it worse because you should know everything about the transaction and if anyone should be professional it should be you. So the seller wasn’t “professional”. You can either start measuring penises or be professional and go on with business. When I bought my house I actually took the time to understand not only the process of a home purchase but the pitfalls and consequences. And if I did not close on time and the seller wanted to walk other than trying to convince them or the agents to convince them to extend there was nothing I could do about it if they didn’t want to.
- Investor · Atlanta, GA · Member since 2015 · 110 posts · 37 votes8y
@Minh Le, good that you were still able to close, and hopefully you learned something from this experience.
Going forward, make sure you factor all the "moving pieces" into your contract closing date. Lender delays happen, but it's not the Seller's problem.
Also, next time you are in a similar situation, sign an addendum with a new closing date. This will give the Seller reassurance that you still intend to close. I understand that in your case you tried to assure the Seller of your plan to close on a later date, but if it's not in writing, you are not committed (or is it different in Texas?).
Another suggestion - being an agent, make sure you consult with your broker when you run into problems. Maybe you did, but it wasn't clear from your posts. Your broker should be able to help you navigate through issues like this.
Best luck and hope your next closing is as smooth as butter!
- Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes8y
@Minh Le The sellers were only “stuck with you” up until your closing date.....after that they can sell to anyone they want. They could have signed a contract with anyone else at any time with a “subject to existing contract not closing”, simply to protect themselves and hedge their bets....happens every day.
And yes, while closing delays are common and sellers usually agree to a delay,, that doesn’t mean a seller Has to give you any extension at all.....after all, a contract is a contract, and it means what it means.
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