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Can a Pasadena home escrow be cancelled by seller?

Can a Pasadena home escrow be cancelled by seller?

An interesting question was just posed on Trulia. A home buyer was told by her real estate agent that the realtor representing the home seller was going to cancel escrow since loan and appraisal contingencies were not released. The question was – can the seller cancel the escrow?


When you make an offer to buy a Pasadena home or any California property, your realtor will discuss with you the three main contingencies of the home purchase. These contingencies are:

  1. Loan Approval Contingency:  A home buyer can back out of the escrow and NOT lose their earnest money deposit if that home buyer can not qualify for a home loan within the contingency time period.
  2. Appraisal Contingency:  A home buyer can cancel the escrow if the home doesn’t appraise to the full purchase price offered. 
  3. Home inspection:  A home buyer has an opportunity to hire a home inspector to check the property condition.  Don’t forget that sewer inspection!  If the inspector finds issues that the home buyer was not aware of before and the buyer is unable to negotiate repairs with the home seller or is unwilling to purchase the house after learning of these issues, the buyer can cancel the escrow.  This home inspection contigency would also include any reports that have been provided to the buyer by the home seller.  If it’s a condominium or a townhome, a review of the financial statements and other relevant information about the complex is done at the same time.

These contingencies are in place to protect the home buyer’s earnest money deposit.  In essence, it’s a free look at the property for the buyer without any penalties.

READ MORE:  The fastest way to lose your earnest money deposit

For a home seller, this contingency period or a “free look” is a period of uncertainty.  The deal is not sealed unless and until the home buyer signs off and releases all contingencies.

A good real estate agent representing the seller will ensure that all contingencies are released within the contractual time frames allowed and agreed to.  Usually, the buyer will have anywhere between 7 to 17 days to complete their inspections, get approved for the loan and get the appraisal completed. 

If home purchase contingencies are not released within the agreed upon time frames, a Notice to Perform is sent to the buyer by the seller and if the buyer still does not sign off and releases the contingencies than a home seller is totally in their right to cancel the escrow and move on with the marketing of their Pasadena home.

READ MORENine Stupid Things Buyers Do to Mess Up their Home Purchase

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Posted on January 13th, 2009
Posted by: Irina Netchaev

  1. tanisha walker

    Is there a time limit on keeping a escrow open in California? Can it got doormat or be cancel without both parties signing off on the cancellation? My seller is trying to back out of our deal they accepted the offer at 300k and signed a contract prior to appraisal but appraisal came back at 270k,,, I signed the addendum then my agent and banking institute both got a verbal from the sellers agent/brker that they agreed to the amended pricing so we proceed and turned in the loan package to get a call 2 weeks later from agent/brker that they have a 2nd buyer willing to over pay for the property so now they want to cancel our deal. I feel dubbed, they relisted property on MLS and had a open house while we were in escrow and now refuse to even refund my out of pocket expenses IE: appraisal inspection, movers, advertising additional rent costs etc… What can i do? Do i have any recourse here?

  2. Irina Netchaev

    Hi Tanisha,

    I am not an attorney and can not give legal advice, so this response is based on what we standardly see in the escrow process.

    Usually when you buy a home, a buyer has a certain # of days to what we call “release contingencies”. This means that within that # of days, anywhere between 10 to 17 days depending on the contract, the buyer works with their lender to ensure that the home appraises for the sales price, the buyer is fully approved for a loan and the buyer has no issues with the physical inspection.

    Should the property not appraise, the buyer can back out within their contingency period and get the earnest money deposit back or try to renegotiate the sales price with the seller.

    There are no verbal agreements in a real estate transaction. EVERYTHING has to be in WRITING! Verbal does not count.

    An escrow company would require signatures from both the buyer and the seller to cancel escrow. It can not be one sided.

    It sounds like there might be a little more to the story. My recommendation is that you get a hold of your real estate agent and sit down to discuss so that you can fully understand the situation.

    I hope this helps,

  3. bill

    Seller killed escrow on their short sale: They decided to head down the foreclosure road. Now they are not signing the escrow release. My agent has been really on the case but not getting any feedback. What are good next steps if the seller continues down this odd road?

  4. Irina Netchaev

    Hi Bill, you are in a very difficult situation. I’m assuming that the seller is not signing the escrow release since he doesn’t want to release your deposit. If that’s the case, you really need to contact an attorney asap. It’s a shame that people try to get away with this type of behavior.

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