Great Job Scott! Let's use the tools we have, let's use the provisions of the excellent Colorado Buy/Sell Contract. Let's be proactive, thoughtful leaders, not over-react.
One talking point we have never ever even discussed before in my 20+ years is what happens to a Buy/Sell Contract if neither party are in intentional breach or default but the Contract cannot close because the title companies are all shut down and the banks are shut down and money can't be wired, loans can't be funded? What if financial business cannot be conducted? What if the county governments are closed and recording is impossible? Obviously both parties could mutually amend/extend the contract assuming buyer still wants to buy, seller still wants to sell - but in THIS market there are often significantly higher backup offers in place. One opinion would be that the duty to close and fund is on the buyer - I don't think a seller has any requirement to amend/extend if they don't choose to. Paragraph 21 says that "all dates and deadlines are strict and absolute". So if a closing date passes without a closing, do you still have an enforceable contract? Is the seller free to close with the backup buyer #2 at a later date once the title companies reopen? It sure doesn't seem fair to a buyer #1 that did everything right but can't close only because the title company is shut down, or the banks are shut down, or 1031 QI's are shut down. What if the buyer had already sent all of the funds required to close to the title company prior to them shutting down, is the seller in default now? Obviously we are in uncharted territory here and talking what-if's that haven't materialized and hopefully won't, but I think this is an interesting talking point for legal discussion, I am in the middle of 3 U/C's right now with a stronger backup behind the 1st place offer on each of those deals, (2 buy side and 1 list side) questions are being asked. The CREC and the Forms/Contracts Committee have been amazing over the past 20 years creating and inserting (and occasionally removing) paragraphs in our contracts that respond to situations and tell us what to do. (Who would have thought 20 years ago we would have a meth lab paragraph in our real estate contracts?) Maybe there will be another paragraph added to the Colorado Buy/Sell Contract soon amending 18.2 or 21 after this pandemic crisis that says something to the effect of "in the event that all other conditions are satisfied and the parties cannot Close due to unforeseen title company closure, bank closure, terrorist attack, pandemic, or other natural disaster, the contract automatically extends and remains in full force and effect until such time as the necessary agencies reopen to perform the Closing". or something like that. But until that is in the next release of Contracts, what do we do? It's too late for the closings that are scheduled this week and this month, but maybe attorneys can write language for additional provisions protecting a buyer/seller for this unlikely situation for contracts we are writing to close next month? I would be interested in hearing thoughts on this topic.
Closing services are mutual instructions of a neutral entity agreed upon by the parties of the contract (and may or not be attached as part of terms of contract), and they are quite specific regarding their duties and limitations. Title company are Escrow, so they can do the closing and hold the monies until ability to disperse at a later date (when relevant entities are up and running). By default, Lender(s) are the responsibility of buyer, so if they fail to perform, then the Buyer still has vicarious liability of their actions ... so if they fail to fund at table, buyer may be prone to losing their Earnest Money (attempt to pursue it from their Lender - good luck!). It all depends on who is at the table and who is the first to pull the trigger of their rights within the contract. So, always turn up to the Closing table, regardless. The Buy/Sell contract provides direction .... so in this climate, you may want to address such concerns as additional provisions or a company addendum (with no guarantees that either will be accepted). Back-ups are in good faith, can be hard to prove that they were never activated into primary position. There are ways to quash that, but I won't reveal my methods in public (people hire me for a reason, afterall). Bottom line, there is no absolute answer to your propose quandary .... each contract is unique to its own and depends on the terms therein based upon what Buyer and Seller agreed upon in writing.
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Thank you for keeping us up to date. Need to disclose for sure.
Always great to hear you words of wisdom. Thanks Scott!
Great Job Scott! Let's use the tools we have, let's use the provisions of the excellent Colorado Buy/Sell Contract. Let's be proactive, thoughtful leaders, not over-react.
Thanks as always Scott!
Thank you Scott for a timely and informative video. Good points which also help stimulate thought.
Just common sense. Thanks Scott!
thank you
One talking point we have never ever even discussed before in my 20+ years is what happens to a Buy/Sell Contract if neither party are in intentional breach or default but the Contract cannot close because the title companies are all shut down and the banks are shut down and money can't be wired, loans can't be funded? What if financial business cannot be conducted? What if the county governments are closed and recording is impossible? Obviously both parties could mutually amend/extend the contract assuming buyer still wants to buy, seller still wants to sell - but in THIS market there are often significantly higher backup offers in place. One opinion would be that the duty to close and fund is on the buyer - I don't think a seller has any requirement to amend/extend if they don't choose to. Paragraph 21 says that "all dates and deadlines are strict and absolute". So if a closing date passes without a closing, do you still have an enforceable contract? Is the seller free to close with the backup buyer #2 at a later date once the title companies reopen? It sure doesn't seem fair to a buyer #1 that did everything right but can't close only because the title company is shut down, or the banks are shut down, or 1031 QI's are shut down. What if the buyer had already sent all of the funds required to close to the title company prior to them shutting down, is the seller in default now? Obviously we are in uncharted territory here and talking what-if's that haven't materialized and hopefully won't, but I think this is an interesting talking point for legal discussion, I am in the middle of 3 U/C's right now with a stronger backup behind the 1st place offer on each of those deals, (2 buy side and 1 list side) questions are being asked. The CREC and the Forms/Contracts Committee have been amazing over the past 20 years creating and inserting (and occasionally removing) paragraphs in our contracts that respond to situations and tell us what to do. (Who would have thought 20 years ago we would have a meth lab paragraph in our real estate contracts?) Maybe there will be another paragraph added to the Colorado Buy/Sell Contract soon amending 18.2 or 21 after this pandemic crisis that says something to the effect of "in the event that all other conditions are satisfied and the parties cannot Close due to unforeseen title company closure, bank closure, terrorist attack, pandemic, or other natural disaster, the contract automatically extends and remains in full force and effect until such time as the necessary agencies reopen to perform the Closing". or something like that. But until that is in the next release of Contracts, what do we do? It's too late for the closings that are scheduled this week and this month, but maybe attorneys can write language for additional provisions protecting a buyer/seller for this unlikely situation for contracts we are writing to close next month? I would be interested in hearing thoughts on this topic.
Closing services are mutual instructions of a neutral entity agreed upon by the parties of the contract (and may or not be attached as part of terms of contract), and they are quite specific regarding their duties and limitations. Title company are Escrow, so they can do the closing and hold the monies until ability to disperse at a later date (when relevant entities are up and running). By default, Lender(s) are the responsibility of buyer, so if they fail to perform, then the Buyer still has vicarious liability of their actions ... so if they fail to fund at table, buyer may be prone to losing their Earnest Money (attempt to pursue it from their Lender - good luck!). It all depends on who is at the table and who is the first to pull the trigger of their rights within the contract. So, always turn up to the Closing table, regardless. The Buy/Sell contract provides direction .... so in this climate, you may want to address such concerns as additional provisions or a company addendum (with no guarantees that either will be accepted). Back-ups are in good faith, can be hard to prove that they were never activated into primary position. There are ways to quash that, but I won't reveal my methods in public (people hire me for a reason, afterall). Bottom line, there is no absolute answer to your propose quandary .... each contract is unique to its own and depends on the terms therein based upon what Buyer and Seller agreed upon in writing.