I am in a tricky situation, and I want to hear your insight. Any feedback is welcome.
I have a property under contract, and tomorrow is the last day of DD period. I found out last week that there is an error on the deed. During previous transaction which was thirteen years ago, the closing attorney made a mistake on recording the deed. My current closing attorney is in the process of fixing it now by contacting previous seller to re-sign the deed and re-record it, but they have not given me definite timeline on when this issue error will be fixed. (Understandably, it could be tomorrow or few years depending on the availability of previous seller) The current closing attorney recommended that I request extension on both DD period and closing date, which I submitted to the listing agent. Now according to the listing agent, he is okay with extending both of those dates, and he is supposedly submitted the extension amendment form to the seller.
Now here are my questions:
Q1: If I don't hear back from the listing agent regarding the signed extension form, would you back out before DD period expired? I am thinking I am going to stay put until an hour before DD period expired and let the listing agent knows that I am backing out, since staying could be risky..
Q2: If I back out of this deal, am I entitle to have DD fee back? I am not sure having a flawed deed can be considered breach of contract.
I don’t know your state contracts, but I would assume they are similar to ours......it is the Seller’s responsibility to deliver clear title, and if he can’t then you get your EM back. Read your contract, this is the seller’s problem.
Ah. Completely forgot about the most important document....
"Seller's Failure to Comply or Breach: If Seller fails to materially comply with any of Seller's obligations under this Paragraph 8 or Seller materially breaches this Contract, and Buyer elects to terminate this Contract as a result of such failure or breach, then the Earnest Money Deposit and the Due Diligence Fee shall be refunded to Buyer and Seller shall reimburse to Buyer the reasonable costs actually incurred by Buyer in connection with Buyer's Due Diligence without affecting any other remedies."
And paragraph 8 indicates:
Seller shall execute and deliver a GENERAL WARRANTY DEED for the Property in recordable form no later than Settlement, which shall convey fee simple marketable and insurable title, without exception for mechanics’ liens,and free of any other liens, encumbrances or defects
Thanks for the reminder!
Of course you should back out if your due diligence period is expiring and the seller hasn't already agreed to extend all relevant time periods. Not doing so sets you up for a default.
Your contract would dictate the terms of return of any due diligence fee.
A "flawed" deed means the seller (likely, depending the flaw) can't convey marketable title and yes, that is a breach of your agreement and should entitle you to a return of your deposit, among other things.
Just for an update, the closing attorney successfully corrected the deed before DD expired. Wheww...
Thank you for your feedback!
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