Why this matters: What do you do when a seller fails to act? In this series, we break down the critical steps every buyer agent must take to protect their buyer. From enforcing specific performance to calculating recoverable money losses, you’ll see how to navigate a seller’s breach with confidence and precision. 

Seller interference

On occasion, during a period of fast rising real estate prices, a buyer agent in a sales transaction is confronted with seller conduct which interferes with closing and causes the sales transaction to fail.

The seller’s conduct is contrary to the activities the seller is to timely perform for escrow to close as scheduled, which include:

  • returning escrow instructions;
  • delivering closing documents;
  • providing escrow with information on the existing lenders so payoff demands, beneficiary statements or assumption papers may be ordered on existing mortgages;
  • delivering seller identification information for title insurance purposes;
  • eliminating agreed-to defects and previously undisclosed property defects known to the seller and unacceptable to the buyer;
  • arranging or permitting inspection of the property by the buyer, appraiser, home inspector, city inspector, etc.; or
  • otherwise enabling escrow to close as scheduled.

A seller independently fulfills the objectives of the purchase agreement they entered into with the buyer by voluntarily and in good faith complying with instructions given to an escrow as reviewed above.

Separately, a compliant buyer has either fully performed or is unable to proceed further toward closing until the seller supplies escrow with necessary information or documents. Occasionally, the seller cancels escrow and escrow cannot close.

Buyer remedies

When the seller breaches the purchase agreement or escrow instructions, the buyer is forced to make decisions in response, called remedies, which include:

  • abandoning the transaction by entering into a mutual cancellation of the purchase agreement and escrow instructions with the seller where the buyer agrees not to enforce their right to purchase the property or seek a money recovery from the seller, other than a release of money the buyer deposited [See RPI Form 181];
  • acquiring the property by pursuing a specific performance action — judicial enforcement — of the purchase agreement and escrow instructions;
  • pursuing the recovery of money when the buyer cannot now acquire the property. Here, the seller has conveyed the property to another person who was unaware of the buyer’s purchase rights, called a bona fide purchaser (BFP); and
  • pursuing the recovery of money equal to the property value lost when the buyer no longer can or wants to acquire the property and the property’s value on the date the seller canceled the transaction was measurably higher than the price the buyer agreed to pay.

A bona fide purchaser (BFP) is a buyer who acquires ownership of a parcel of real estate without knowledge of an enforceable purchase agreement held by another buyer to acquire the parcel. As a BFP, the buyer pays consideration to acquire and take title to the property without knowledge of an outstanding right held by another to buy the property. [Calif. Civil Code §3395]

Editor’s note — Stay tuned for the next three episodes of this series.