Seller Backs Out of Escrow

What To Do If A Seller Is Delaying Escrow?

Updated on September 27, 2022

What do you do when a seller is delaying escrow for the sale of a property you’re purchasing? The escrow process can be stressful for both sellers and buyers. Sellers are usually busy making repairs and preparing to close on the home while buyers are busy securing a loan and preparing to purchase their new home.

It’s not uncommon that the buyer or seller asks to delay closing escrow. Delays are not ideal, but the reality is that they do happen and often in a real estate transaction, they are due to no fault of the buyer and seller.

Although, it is usually the buyer that cannot close escrow on time, when the seller cannot close escrow on time, the buyer has options. The buyer’s best recourse depends on the terms of the sales agreement and on the circumstances of the request.

Common Reasons of Delayed Escrows and Closings by A Seller

Reasons why your seller is delaying escrow include the following:

  • The seller needs more time to pack and move.
  • The seller is facing issues with the new home they purchased.
  • If you’re purchasing a home through a short sale, the sellers might be stalling on purpose because they’re living in the home for free.
  • The seller regrets selling the home and hopes the delay will cause the buyer to terminate the sales agreement.
  • Seller cannot find a relocation property.
  • Seller is participating oil a 1031 tax deferred exchange and is having difficulty finding a replacement property.
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Steps To Follow If A Seller Is Delaying Escrow

First Step: If your Seller is Delaying Escrow, Check Your Contract

Read through your contract with your attorney to see if the closing date is set in stone and to determine if you have an obligation to go through with the sale if the seller misses the closing date.

If the contract states a specific date, the seller can’t delay without your written agreement unless your contract automatically extends the deadline.

If the verbiage reads that closing is to occur “on or about” a certain date, the seller has more leeway — with as much as 30 days — before they’re in danger of breaching the contract.   An attorney can advise you on the strength of the language in any particular contract.

Second Step: Contractual Options

The contract usually gives a buyer several options for dealing with a seller’s escrow delays. The first is to grant the seller more time by having your attorney prepare an addendum to the contract that delays closing by however much time the seller needs.

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You may ask for a credit if the arrangement results in out-of-pocket expenses, such as additional rent or mortgage payments. If, on the other hand, you’re unwilling to delay closing and your contract doesn’t obligate you to stick it out, you can refuse the extension and walk away without risking your earnest money deposit. However, your deposit may be all you have the right to collect.

You may also have the option to do a notice to perform or a demand to close escrow. These very typical contractual provisions  give the buyer the right to demand performance from the seller before buyer sues.

For help with your escrow dispute, specific performance matter or other related claims, please do not hesitate to reach out to us to schedule a consultation with one of the top rated real estate lawyers in Los Angeles. We have extensive experience with sellers refusing to perform on a sales contract.

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