Agent

Extending escrow: Unreasonable or not?

Developer's permits delayed, $5 million at risk

Signing a written contract with someone includes an unspoken agreement to be reasonable. A court recently found that this means property sellers must be reasonable in their decisions about whether to allow the buyers to extend escrow. The buyer contracted to purchase 86 acres from the seller, to subdivide it and build homes on the lots. At the outset, the buyer agreed to close escrow within two years; as time went on, it became clear that the permit situation was complicated and that it would take much longer than two years to obtain the planning permissions to subdivide the property, which needed to be in place before escrow could close.The buyer upped his initial $150,000 deposit by an additional $315,000, and the seller agreed to extend escrow for five years, and expressly agreed that future extensions would not be unreasonably denied. Five years and $5 million later, the buyer was still chasing after those governmental permissions. Imagine the shock and horror when the ...

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