Yesterday, I found myself breaking a stalemate –
My firm had closed a file in escrow, where the Buyer and his Lender had refused to send the funds to our escrow account until the Seller vacated the home. The Seller refused to vacate the home until she received a check.
Surprisingly, this does not happen more often. Who was right and who was in breach? As with any legal question: it depends which party the lawyer represents! So let’s figure out how to solve the problem and avoid a lawsuit.
The Lender’s Perspective
If you represent the Lender, this particular Lender is housed in California (which is an “escrow state”). They do not fund closings the day they close. My first step was to explain that, without the funds in our escrow account, the Buyer would not be “ready to close.” So I quickly pointed out the difference between California and Georgia and explained the necessity for the funds to make their way into our escrow account. We provided assurances in writing that no funds would be disbursed until the home was ready to be transferred. So remind those Escrow State lenders that, in Georgia, purchase transactions generally fund the day of closing.
What about the seller?
Here, the Seller has a point, right? Does she have to “vacate” the house before closing? Of course not, because it’s her primary residence and without the proceeds she has nowhere to go. However, the story doesn’t end there. The Seller had promised to vacate home and we all know the contract typically has a clause that the “home shall be broom swept clean” to define just how vacant the home is supposed to be. Well here, the Seller actually suggested that the house was finally clean but the prospective Buyer needed to call animal control to “pick up the dogs.”
What to do next?
So the seller has not exactly performed and is far from inspiring the buyer.
Who will blink? When we are involved, hopefully, (as occurred yesterday with my involvement), all three will blink. Lender agreed with my earlier analysis to send their funds; the Buyer finally understood telling everyone you were ready was not the same as showing everyone by wiring the funds to our attorney’s trust account. Of course I assured him that under no circumstances based on the Seller’s (bizarre) behavior would we disburse until she “finished the job,” and removed the debris and dogs from the property.
Lastly, a skilled staff person gently took my less than gentle message back to the Seller – “everything but the dog” was not good enough. If you want your check Ms. Seller, get the debris and the dog out. The Buyer will then be at the home with his agent for a final walkthrough and only after confirmation will we hand the Seller her check.
If you represent the Buyer – make sure they perform under the contract. I don’t care if they had a bad experience previously, no money in an attorney’s IOLTA escrow account the day of closing is failure to perform. Ditto for the Lender!
If you represent the Seller – make sure the Seller has the home ready for transfer. It should comply with the contract and, but for the exchange at the closing, be imminently ready for transfer. Failure by the Seller to do so is a potential breach.
This was a low dollar distressed sale but we had a recent high dollar sale with similar challenges. The Buyer wanted the nail holes filled and the “walls painted,” and the Seller and his agent explained the “paint was more than 15 years old” and it would not match. Wow, were they right! So how is this the same? Because expectations as to how to deliver the home were not consistent between parties and it led to a tense and delayed closing in both cases. So the good news, the deals both closed, but the bad news was they weren’t completed in less than 1 hour.
Manage your clients and ensure they fulfill the obligations of their contract and perform accordingly up to and even after closing.