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When the Seller Refuses to Move Out on Time
When the seller refuses to move out on time, it causes complications for everybody.
One of the worst things that can happen in any escrow is dealing with adversarial buyer possession that can arise when the seller refuses to move out on time. The reasons a seller may refuse to move out are numerous. The seller might not have been made aware of the date of closing. Although our transaction coordinators send out an estimated timeline, not every listing agent will respond to the timeline. Some will not send it to their sellers. Some listing agents don’t hire a transaction coordinator, either. Or, sometimes listing agents don’t know how to count the days to closing in a purchase contract. In which case they give the wrong date to the sellers.
When the seller refuses to move out on time, it can hold up the closing. It can also put the entire transaction at risk. Once the buyer issues a Demand to Close escrow, if the seller doesn’t close on the contractual date, the buyer is free to cancel the transaction without putting the buyer’s earnest money deposit at risk. The buyer might decide the seller is in breach of contract. If the buyer suffers financial consequences as a result, well, let’s just say I would not want to be that listing agent or that seller.
The other issue that arises is the buyer’s final walkthrough. Our California purchase contract allows for such an inspection within 5 days of closing. Sometimes buyers make unreasonable requests such as they might insist that the seller remove all items from the house prior to closing. However, a seller is not required to completely move out until the date in the contract. The date in the contract, for better or worse, is the day of closing at 6 PM, unless otherwise agreed to in writing.
The time to think about when buyers expect a seller to vacate the house is at the time the buyer’s agent prepares the offer. That is the time to negotiate an early move out if that is what the buyer desires. A buyer should not demand the seller move out early when the buyer has only a few days left until closing. That is being unreasonable. Completing the final walkthrough can be more difficult when the sellers’ belongings are still in the house, but that’s what a buyer gets when the buyer does not negotiate an early move out upon contract inception. The buyer is stuck.
Your best bet is to work with the seller when the seller refuses to move out on time. Either move the closing date to accommodate the seller’s move or play hardball and cancel the escrow after issuing the Demand to Close escrow. There are no seller move-out police. You can’t call the cops.
When a Sacramento Buyer Cancels Escrow it Opens the Door
Another door can open when a Sacramento buyer cancels escrow.
When a Sacramento buyer cancels escrow, it can be hard on everybody all around. I’ve recently had to resell three homes due to buyers who ultimately did not perform. In one case, the buyer had wanted to buy a different home but the seller of that home had chosen a better offer, so the buyer lost out. When that seller lost her buyer, her agent notified our buyer, and enticed that buyer to cancel and buy the home the buyer wanted in the first place.
It worked out for that particular buyer but my poor sellers, living in a mobile home in the middle of South Dakota and praying for a closing, are distressed. That listing is back on the market. Buyers don’t care much about the ramifications of the hurricane they leave behind.
In another escrow, the buyer decided the sales price was too high halfway through. We had several appraisals, one of which exceeded the sales price, but the buyer refused to close. The buyer’s agent was so certain it was closing, we thought it was OK to remove the home staging. We had to re-stage. Fortunately, we found another buyer who liked the home enough to step up to the table. But it delayed closing for another 30 days.
The escrow that just closed yesterday was a shining example of what happens when a Sacramento buyer cancels escrow. The buyer’s agent had stopped all communication. Both my TC and I emailed, called and sent text messages almost daily, and the agent simply ignored all communication attempts. Finally, after dragging it out, sending a Demand to Close escrow, the agent finally called to say her buyer can’t get the loan.
My seller was furious. After he calmed down, he offered to pay me extra to get him a higher sales price. That in itself would be called a net listing. It means if a seller wants, say, $300,000 and I bring him an offer of $350,000, I make $50,000. Which is ridiculous. I get paid enough. It’s called a commission. I rejected the seller’s offer and simply found him another buyer.
We had an FHA appraisal at our sales price. The buyer’s agent knew this, and his buyer was FHA, still he wrote the offer for more than the sales price. It won’t appraise for more. An FHA appraisal is assigned a case number and the next buyer will get the same appraisal. Instead, I suggested the seller counter with the buyer paying the difference in hard cold cash, in addition to making the sale strictly AS IS.
The buyer sent a request for repair and we countered with Notice to Buyer to Perform to remove inspection contingencies. The buyer realized the error of his ways and backed off. We closed yesterday.
When I called the seller to confirm our recording, he was ecstatic. All of a sudden, having gone through two escrows was no big deal. Hey, I sold the house twice and was paid only once. But that comes with the territory. When a Sacramento buyer cancels escrow, it means we don’t abandon our sellers because of it and they should not abandon their listing agent either. It’s a two-way street.
In the end, my buyer received another $3,000 for his property for waiting another 30 days to close. Although he was unhappy at the time with the buyer who could not close, the next buyer paid even more. As long as he is happy, I am happy.
A Negotiation Tactic for Sacramento Realtors Dealing With Unreasonable Demands
Sellers deserve a Sacramento Realtor who is fearless with strong negotiation skills.
Whenever I am faced with a dilemma, the way this Sacramento Realtor works her way out of it — as hokey as this might sound to some of you — is to consider my fiduciary duty to the client first. Forget what I might think or what the other parties might want, which negotiation tactic is best for my seller? The answer is almost always crystal clear at that point. That’s a little secret I pass along from me to you. It keeps things more simple when focused.
Notice I didn’t say it makes my job easier because much of the time it doesn’t. The negotiation that is best for the seller almost always involves extra work and it can be complicated. Not only that, but I can’t go around making unilateral decisions without my client’s acknowledgement and permission. It’s not my house nor my transaction. That’s a good point to remember. As a Sacramento Realtor, you can’t get too wrapped up in somebody else’s situation that you start to make decisions for them. Because that would be bad.
It can be a fine line to walk. To want to protect your client and negotiate what is best while at the same time not making the decisions for your client. It’s in the approach though. I’ll give you an example that happened a few days ago on a home that just closed escrow on Friday.
The buyer’s agent has had terrible experiences in the past with tenants, which might have clouded his judgment somewhat. Although this home was not tenant occupied, he felt the family who lived there acted like tenants, and that was enough, probably through transference, for his buyer to submit a Request for Repair asking for the squeaky front door to be unsqueaked and a minor hole in the closet patched. The buyer asked for a few other things, including shampooing the carpet, and he tried to force the family to move prior to closing.
While we were pondering how to respond to this unreasonable request at the 11th hour, the agent hit me with an email to say he also decided they would prefer to close escrow on Monday and not on Friday. Our purchase contract stipulated a closing on Friday. The seller was about ready to agree to credit a small amount of money to the buyer to compensate for his anguish over the squeaky front door until the buyer’s agent came up with an additional demand.
At that point, the seller rejected the Request for Repair outright. In addition, I mentioned to the seller we should submit a Demand to Close Escrow because the buyer appeared to require a kick in the seat of his pants. She wasn’t sure what that meant, I suspect, but she agreed to the negotiation. You really can’t renegotiate a contract, I explained to the buyer’s agent, without an agreement from the seller, and while I could not speak for the seller, I had a suspicion she would cancel the contract if they tried.
The best way to cancel a contract is to first send a Demand to Close. The buyer’s agent forced us to produce it. That negotiation tactic was the best protection for the seller. The seller has less to lose than the buyers, I pointed out. Now the home would be vacant, making it easier to show, which means we would get more showings and, in our tight market, probably a higher offer. Yeah, let’s go back on the market.
Painful to say, but the right negotiation for the seller.
We closed escrow on Friday on time. No Request for Repair, either.
When a Sacramento Realtor focuses on the negotiation that is best for her seller and takes herself out of the situation, the solution is apparent.
The Seller Demand to Release Deposit Can Shake Up California Escrows
Seller Demand for Release of Deposit is new form
Many of the disputes and disagreements in an escrow seem to center around the buyer’s earnest money deposit and its release. Whenever a buyer cannot close for some reason — and there seems to be more and more of “those reasons” lately — the sellers tend to immediately eyeball the earnest money deposit and they expect to get it. If the seller has a right to the earnest money deposit, there is a new form generated late in 2014 by C.A.R. that can be delivered to the buyer called a C.A.R. Form SDRD, 11/14: Seller Demand to Release Deposit.
The Seller Demand to Release Deposit allows an escrow company, at the escrow company’s discretion, to release the deposit within 10 days to the sellers without the buyer’s cooperation or agreement.
The Seller Demand to Release Deposit illustrates and points to paragraph 14G of the residential purchase contract, which also states a party who refuses to cooperate can be fined a $1,000 penalty, according to Civil Code. I suppose this means if the buyer has no right to keep the deposit, but refuses to sign the release, not only can the escrow company release the money to the seller but the seller could sue the buyer in Small Claims Court for an additional $1,000. This is a pretty huge change over previous years because much of the purchase contract, up to this point, seems to favor the buyer in California, except for this portion.
Of course, the buyer’s deposit is generally only at risk if the buyer has released all of the contingencies and cannot perform or has been given a Notice to Buyer to Perform and fails to act. Let’s say a purchase contract expires because the buyer can’t close on time for some reason. The buyer can issue an Extension of Time Addendum but a seller does not have to agree. If the seller, say, refuses to sign an extension, the seller could most likely cancel the contract, after issuing a Demand to Close escrow, and then demand the deposit, providing it does not exceed Liquidated Damages.
In our limited inventory Sacramento real estate market, prices can rise and sellers might get a better price for the home if they put a home they sold in, say, a slow month like November, back on the market in February. This should be a wakeup call to buyer’s agents and their buyers when lenders can’t close on time and in accordance with the contract.
And of course, all parties should obtain legal advice and not rely on this Sacramento REALTOR’s observation because this REALTOR is not licensed to practice law.
Closing an Escrow Against the Odds
I may have been riding ponies and yelling giddy-up last night but this morning my birthday is over and I’m just another old fart whose day of glory has passed. No more 20-year tawny for me today, me — who had the brilliant thought that if one glass was a fine way to end the evening, a second glass might be even more fun. Instead I have built-in radar that says, nope, you, young lady, need to go directly to bed, do not pass go, do not collect $200. Put that head on the pillow, NOW.
I am thankful for my built-in radar because it keeps me out of danger. I have pretty good gut instincts as well which I, at times, rely upon. It’s the reason we closed an escrow on Friday that probably would not have otherwise closed this month.
This was a transaction initially scheduled to close within the first week of June, not the end of June. Mid stream, the mortgage lender switched the financing from conventional to FHA because the buyer did not qualify. The underwriter discovered a foreclosure on record some 7 years past for one of the buyers and disqualified the buyer. Yup, guidelines can make provisions for waiting periods but underwriters can do what they want.
Then the file sat at the lender because everybody thought somebody else was working on it, or at least that’s the mortgage lender’s story and he was sticking to it. He went so far as to pull out the my-grandmother-died card, or wait, that might have been another transaction and these are probably guys without grandmothers, I may note. I dunno. What I did know was I had a very unhappy seller due to the financing for the buyers. She expected to close. She had to make another mortgage payment she wasn’t planning on making. She asked me for options.
The solution she liked best was to sell the home to another buyer. So that’s what we did. We signed a back-up offer with a second set of buyers and issued to the first buyer a Demand to Close escrow. The buyer’s agent was horrified. Said she had never received a Demand to Close escrow in all of her years in real estate. It won’t be the last, I offered. Not in this real estate market. The lender has the ability to make any file a priority, and it may as well be ours. They managed to pull a rabbit out of the hat and closed.
