July 31st, 2023 at 1:33 pm
A. A buyer’s right to: (1) Review reports that the seller delivers late; and (2) Cancel based on something on those reports.
B. A buyer’s right to cancel when a new material fact affecting the property is discovered during escrow.
C. A buyer’s right to cancel under the TDS law.
D. Any of the above.
Answer: An agent may be referring to any one of at least three “5-Day Rules.” Answers A to C are all possibilities. Answer D is the correct answer to the Multiple Choice question.
To take a deeper dive into the different “5 Day Rules,” please stay tuned to our Legal Tip of the Week for the next 3 weeks. But if you just want the bottom-line, here it is: When something comes up during escrow, and the buyer has already removed all contingencies, agents tend to think that the buyer can cancel under a so-called “5-Day Rule.” But there are at least 3 different 5-Day Rules. And whether a buyer in any given situation can legally cancel is usually not a straight-forward “yes” or “no” answer. Instead, it usually involves a detailed analysis of the exact facts and circumstances surrounding that particular transaction. Factors to consider generally include whether there’s a new disclosure item, what that disclosure item is, whether it’s on a report, whether the seller previously knew about it, how it was discovered, and so on.
As the agent involved in the sales transaction, you generally will not know in absolute terms whether a buyer in any given circumstance will or will not be able to cancel successfully. That’s because the legal answer is ultimately determined, if needed, by a judge, jury, or arbitrator, and not by us. We don’t know how any particular situation will play out if it goes through the legal process of mediation, arbitration, and/or litigation. But we are not required to make legal determinations anyway. Our job as the real estate agent is simply to give guidance to our own clients, while advocating on their behalf when communicating with the other side.
Stay Tuned! Check out next week’s Legal Tip for a discussion of the 5-Day Rule for late reports (Answer A).
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