March 1st, 2013 at 7:37 pm
Specifically, one of the best and seemingly most innocent things an escrow company does is send documents to the buyer and confirm, in writing, that those documents were received. These items take many forms, from the termite report to the CC&Rs to the Preliminary Title Report. In most cases, this is a wonderful thing. We need to make sure that the buyer receives those documents and the receipt produced by escrow proves that fact. What we have seen recently, however, is that many escrow companies are doing more than proving the buyer’s receipt. Instead, the document they send with any particular report is called an “Approval” and, in addition to acknowledging receipt, the buyer is asked to “approve” it. The problem comes when that Approval is signed without any thought or discussion. For example, the Purchase Agreement has a contingency for title or CC&Rs, and has specific timelines and rights that go along with that contingency. If the buyer receives either of these documents from escrow and, without thinking or talking to you, signs this “Approval,” have they impacted their contingency rights? After all, if I sign a the Approval upon receipt, and then read the document, something in it may cause me to want to cancel. Theoretically, however, I have already “approved” the document and an argument can be made that it would be a bad faith breach of contract to now exercise the contingency. The lesson here is obvious. Make sure your buyers know to run all documents by you before they sign them and you can make sure they don’t approve anything they are not ready to approve. Cross out the word “Approval” in the title of the document, and cross out any language in the body saying the buyer “approves the report.” That way you protect your client’s contingency rights and keep them as long as necessary.
As an aside, you should know that, as of today, Pickford Escrow has no documents that include approval language. They will only send your clients receipts. As a result, when you use Pickford, you can be sure they will not cause this problem for you or your client.
As always, please contact your manager if you have any questions and they will get the Legal Department involved if necessary. Thanks
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