November 6th, 2023 at 3:28 pm
Multiple Choice Question: Can the seller immediately initiate a cancellation of the contract? Pick the best answer:
A. Yes, because the buyer has breached the contract.
B. Yes, after first serving a 2-day Notice to Buyer to Perform (NBP) to pay all-cash.
C. Yes, after first serving a 3-day Demand to Close Escrow (DCE).
D. No.
Answer: Answer A is wrong. An all-cash buyer has the right to pursue an alternative form of financing under paragraph 6C of the RPA. Also according to paragraph 6C, a seller can rely on the buyer’s representation of paying all-cash by the closing date. Additionally, the seller is not obligated to cooperate with the buyer’s efforts to obtain financing. However, the seller cannot “interfere with closing at the purchase price on the COE date.”
Given that Answer A is wrong, Answer B is wrong too. The RPA allows an all-cash buyer to pursue alternative financing (see paragraph 6C).
Answer C is wrong. One week before close of escrow is too early for the seller to serve a 3-day Demand to Close Escrow (DCE). The seller must wait until no sooner than 3 days before the closing date to serve a DCE (see paragraph 14G of the RPA).
Answer D is the correct answer. As a listing agent, it may be a good idea for you to warn your seller-clients upfront that the RPA allows an “all-cash buyer” to pursue financing. Of course, pursuing a loan may mean that there will be lender-required repairs, low appraisals, delays in closing, and other lender-related issues. However, the seller is not obligated to cooperate with the buyer’s efforts to obtain financing, as long as the seller does not interfere with closing at the purchase price on the closing date.
-Thank you to Valerie Punwar (Calabasas Office) for suggesting this week’s legal tip.
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