Stuck in escrow with an investor

Stuck in escrow with an investor

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Stuck in escrow with an investor

Dear Phyllis,

My uncle passed without a will, and I am the administrator of his probate estate. He has a late 1890’s Victorian home in Los Angeles. It’s not a great area, and the home needs a lot of work. We originally had an offer that was just $10,000 over asking, so I decided to hold out for a better price. Then an investor wrote an offer for $50,000 over, and we opened escrow.

Escrow was scheduled in ten days.  Five days into escrow, the buyer completed inspections and requested an $80,000 price reduction. We declined the request, and escrow issued cancellation documents. However, the buyer refused to sign the cancellation.

Now I want to open escrow with the first offer, but the escrow company says it cannot open a new escrow until the current buyer signs the cancellation. At this point, I do not understand how we ended up in this situation. It feels like the system protects the buyer more than the seller. I am now wondering what our next step should be.

Stuck in Escrow With an Investor

Dear Stuck in Escrow,

I am not a real estate attorney and can’t offer legal advice, which you likely need. However, I can relate to you, my experience. Over the years, I have sold many fixers, and I have learned that often these investors make blind offers. A blind real estate offer is one where the buyer hasn’t taken the trouble to view the home. If the seller accepts the offer, the investor will visit the home and decide whether to move forward and at what price.

If a lockbox is installed at the property, I first obtain the “lockbox reading” to confirm that the buyer’s agent has accessed the home. After I verify access, I issue a counteroffer. Because we are working with a ten-day escrow, the timelines remain extremely tight.

As a result, you may discover that an investor submitted an offer $50,000 over asking with no intention of closing at that price. In effect, that buyer has now tied up your property.

So what happens next? I assume the contingencies were removed in writing. In this situation, you should consult a real estate attorney, who may advise you to revoke any cancellation instructions and issue a Demand to Close Escrow first. At that point, the buyer typically has three days to respond. Since an escrow company cannot open two escrows on the same property, complications can arise quickly. If the original buyer refuses to sign the escrow cancellation, you should continue working with your attorney and ask whether you can open escrow with a different escrow company.