DELIVER YOUR AVID EARLY. IT AVOIDS PROBLEMS.

November 2nd, 2012 at 7:20 pm

One of the common problems we see in our files is the late delivery of AVIDs. Oftentimes, a deal is a few days from closing, and no AVID has been delivered to the buyer or signed by the agent. This, of course, causes many potential problems that you need to consider and avoid. First, it is very common for an agent to complete his portion of the Transfer Disclosure Statement by writing “[s]ee attached AVID.” By doing that, you are incorporating the AVID into the TDS, and making its delivery the delivery of the TDS itself. As a result, in such a case, the delivery of the AVID carries with it the three day right to rescind. Therefore, in most transactions, delivering the AVID early eliminates the right to rescind and makes your deal more likely to close. By delivering it late, you give the buyer a last minute right to cancel.

Even if the AVID is not expressly incorporated in the TDS, the problem of a “right to rescind” still exists. After all, the law states that any time the TDS is amended, the buyer gets a new three day cancellation right. As a result, if I give the buyer the TDS on day 3, but deliver my AVID on day 35, there is a question regarding whether the buyer has a right to cancel. In those instances, we need to determine whether the late delivered AVID constitutes an amendment to the TDS. While there is no express answer to that question, at a minimum we have created an argument for the buyer. They will claim it is and that they can cancel. More importantly, we have probably created some distrust on the buyer’s part. After all, when a buyer is told about a material fact so late in the deal, they often feel that the seller was hiding things and distrusts the seller’s performance as a whole. In such a case, your buyer is more likely to cancel the deal. Furthermore, if you take the position that no cancellation right is created by the late delivery of an AVID, you are theoretically forcing the buyer to close on a house they don’t want, thereby making it more likely that a lawsuit will result.

Finally, by delivering your AVID late in the transaction, you are running the risk of a late cancellation. Why put in all that work only to have the buyer cancel the deal, when you could have determined whether that would happen by delivering your disclosures earlier? In other words, you protect both yourself and the seller by delivering early and eliminating cancellation rights. If the buyer cancels, you have invested less time and can move on. If they don’t, you know you have a more solid deal. So deliver your AVID early. It is better in every way.

As always, please let us know if you have any questions

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