Updated on November 25, 2022
When a homebuyer negotiates a purchase and sale agreement, one important term that the homebuyer should negotiate is the escrow closing date. The escrow closing date is very important because it is the date that the buyer is obligated to perform by funding escrow and closing the transaction.
However, often a buyer will find him or herself in a situation where he or she cannot close by or on the escrow closing date. This can be very stressful, as buyers who are unable to close on time often risk losing their down payment on the property he or she is excited to purchase.
However, there are many steps a buyer can take to preserve his or her rights to conclude the sale if he or she foresees an inability to close on time. This blog discusses five options.
First, the buyer should check the purchase and sale agreement to see if there are any extensions of the closing date. Indeed, escrow extensions are built into many purchase and sale agreements.
While an astute buyer will know from the outset whether or not he or she negotiated for any such clause, it is always good to check and make sure. Further, there are different types of extension provisions.
For example, one provision might give the buyer a complete and unfettered right to extend escrow by fifteen (15) days, while another provision may give the buyer the right to a fifteen (15) day extension based upon a specific issue arising, such as a delay in financing.
Second, a buyer may ask a seller to sign an Extension of Escrow Addendum. This will allow the buyer and seller mutually extend the closing date. Many times, the seller will be interested in closing the deal and will agree to sign the Extension of Escrow Addendum without requesting any additional consideration.
Third, if a seller is unwilling to voluntarily sign an extension of escrow addendum, a buyer could attempt to negotiate for an extension by offering additional consideration.
Fourth, if a seller refuses to grant an extension, it is possible the seller will fail to cancel escrow on the closing date. Indeed, the escrow company will often leave the escrow open after the closing date if the seller does not instruct the escrow company to cancel the escrow. Under this scenario,the buyer can attempt to perform after the escrow closing date. However, this strategy does come with some risk and you may want to consult with a real estate attorney regarding the pros and cons.
Fifth, there may be additional safeguards in place to help extend the closing deadline. For example, during the Coronavirus Pandemic, the California Association of Realtors issued a Coronavirus Addendum. The purpose of the Coronavirus Addendum was, in part, to extend escrows based on Coronavirus Related delays. Indeed, if a buyer foresees issues with closing escrow on time, he or she should determine whether there are any additional applicable forms to assist them.
Ultimately, if you have questions in preparation to buy or during escrow on a real property, you may want to contact an attorney. The attorneys at Schorr law have years of experience representing clients in real estate matters.