Last week I spoke about buyer protections in the DRE (Department of Real Estate) residential purchase contract. The DRE wants consumers to be protected and wants buyers to have time to properly check out a house as well as make sure they can get financed.
What about sellers? What protections do they have? First, they don’t have to list their home and they don’t have to accept an offer. If the offer comes in at full list price with a qualified buyer and the seller rejects the offer then commissions could be owed to the listing agent.
If a seller signs a contract to purchase and the buyer performs then the seller is obligated to sell the home. If the sellers change their minds after accepting an offer their only recourse is to negotiate their way out, if the buyer is willing. What if the seller accepts an offer, the contract is delivered back to the buyer, and a few hours later a higher offer comes in? Tough luck. The sellers may possibly negotiate a first backup with the second buyer and hope the first buyer goes away. The seller may refuse to make any requested repairs and hope the buyer leaves as well, but if the buyer performs under the terms of the contract then the first buyer gets the house.
What if the buyers do not remove their contingencies in 17 days? If the buyers do not remove contingencies on the 17th day the sellers may give them an extension. By doing nothing, the contingency period (due diligence) automatically extends. If the sellers deliver a notice to perform (usually 48 hours) then the buyers must remove all contingencies or cancel the contract and get their earnest money back.
What if the buyers’ contingencies are removed but they fail to close on time? Again, the sellers have the option to extend the closing formally, just wait, or they may give the buyers a demand to close escrow. If the buyers do not close escrow they could lose their earnest money and/or be subject to legal action.