Legal Question in Real Estate Law in California
We, the sellers, have an open escrow on a property in LA County "sold by owner." The buyer has given a "good faith deposit" to the escrow agent. We have an escrow number, date of opening, and a tentative closing date. As neither of us was represented by an agent at the time, the escrow agent began drawing up escrow instructions for us to read, make changes, etc. We have been negotiating with the buyer certain allocation of costs "outside of escrow," and are awaiting the buyer's decision before asking for those changes to be stipulated in the EIs. NOTHING has been signed. There is no signed purchase agreement.
My question is this: As the EIs have not been signed, and there is no signed purchase agreement, may we, the sellers, unilaterally, cancel the escrow proceedings?
The first paragraph of the General Provisions of the EIs states: "The duty of [named escrow company] to act as escrow holder does not begin until these instructions, signed by all parties, are received by [named escrow company]. Until such time, either party may unilaterally cancel and upon written request delivered to [named escrow company], the party may withdraw funds and documents previously handed to [named escrow company]."
Our escrow agent says there must be a written agreement between both the buyer and seller to cancel the escrow.
What is the answer?
4 Answers from Attorneys
If there is no signed purchase agreement, there is no pending sale and you may unilaterally walk away at any time. While you do not have to sell the property to the "buyer" who opened the escrow, you may need to sign an agreement canceling the escrow and releasing the deposit to the "buyer".
The escrow instruction states either side can cancel it, both do not have to agree. The agreement to sell is voidable as there is no signed written agreement of sale. You could declare it void; since escrow has not opened, you do not have to cancel it, although it is better to notify everyone [you can not cancel/end something that never began]. Escrow automatically would have to return the deposit to the buyer, although it is smarter to make a demand on them.
The question really has two answers: (1), as Mr. White says, there is no contract for the sale of the property, and all you have to do is withdraw any open offer that's still out there, and be sure to do this, if appropriate, before just walking away; but (2) since you have begun dealing with an escrow company, there rremains a question as to whether you owe the escrow company anything for services it has performed to date.
I don't understand how you can have an open escrow without at least signed escrow instructions.
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