How Can I Handle a Firm Seller’s Per Diem Deadline After Escrow Contract Expiration?

I'm assuming your contract is a standard CAR-RPA purchase agreement. If that is the case, once the seller has delivered a Notice to Seller to Perform (NSP), the seller can cancel after two days. After this period, the seller must agree to release your deposit, minus escrow fees and any other costs incurred by you during the escrow, as well as the amount specified in the liquidated damages clause, if you initialed that section of the contract (I typically do not recommend this to clients, but buyers often sign the clause anyway).

You clearly do not want to forfeit 3% of the gross sales price to the seller, so you would refuse to release any of the escrow funds, which would require the seller to sue you for the difference. However, the seller can simply relist the property while your funds remain in escrow, meaning your leverage is quite limited (unless you did not initial the liquidated damages clause).

The seller is requesting an additional $8,250 to extend the escrow until July 23. You could agree under protest and then pursue legal action against the seller after closing to recover the funds in small claims court, arguing that your acceptance was obtained under duress and that the terms were unconscionable. However, there is a risk of losing that legal battle.

You might consider making a lump sum offer of a lesser amount (e.g., $4,125) for any closing before the 23rd.

These are some options to consider; however, from a purely legal perspective, the seller holds the advantage, as it seems he or she has acted reasonably within the law.

I understand that you find the seller's charge of $250 per day excessive, but it is not unreasonable given the size of the transaction. Nonetheless, it does undermine the voluntariness of the transaction, which is necessary for recovering your money in small claims court.

Your only other option is to refuse, proceed towards closing, and hope that when you are ready, the seller will

Can they enter into another RPA with another buyer while our escrow remains not canceled?

Yes. You would need to file a lawsuit and record a lis pendens to prevent the sale.

How can you estimate the size of this transaction? His mortgage is probably $4k/month, and is $250/day reasonable?

Interest rates are currently rising rapidly. As a result, borrowing power will decrease, which will exert downward pressure on prices. This situation could provide grounds in court to argue that real damages may occur if the deal is not finalized promptly. In a typical rising real estate market, the seller is rarely harmed because they can always sell to the next buyer for a higher price than before. However, at this moment, that is not the case. The market is quite fluid, and things could change quickly.

I have a good faith interest in closing, yet they are trying to force me to cancel and keep my money anyway, claiming they are being reasonable? You seem biased towards sellers.

That's the first time I've encountered someone saying that. In reality, most listing agents view my involvement as unwelcome because I am one of the few real estate brokers who genuinely strives to help buyers secure a lower price. Most buyer's agents are focused on maximizing their commission, which typically means pushing for the highest possible sales price.

Now, putting aside my role as a real estate broker and adopting the perspective of a judge, the issue is straightforward: the CAR-RPA is designed by the California Association of Realtors to facilitate real estate transactions. The CAR has developed a robust contract that almost always favors the seller, ensuring that agents receive their commission. If there are escape routes for the buyer, it generally means the buyer's funds will also escape, leaving nothing for the agents.

If it appears that I am biased towards sellers, it is solely because the contract you signed is structured to heavily favor sellers—buyers often remain unaware of this since no agent will disclose it to them.

It has long been recognized, of course, that every contract imposes upon each party a duty of good faith and fair dealing in the performance of the contract such that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36, 44 Cal.Rptr.2d 370, 900 P.2d 619.) The Supreme Court has clarified, however, that an implied covenant of good faith and fair dealing cannot contradict the express terms of a contract. (Carma Developers (Cal), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 374, 6 Cal.Rptr.2d 467, 826 P.2d 710 (Carma).)[9]

In Carma, a commercial lease expressly gave the lessor the right to terminate the lease and recapture the leasehold upon notice of the tenant's intent to sublet. After the tenant relocated its headquarters out of the area, it submitted a notice of intent to sublet approximately 80 percent of the premises. The lessor responded with a notice of termination and then (unsuccessfully) pursued negotiations of a new lease with the proposed subtenant, seeking to secure for itself the higher rents. The tenant obtained a judgment for breach of the implied covenant of good faith and fair dealing, but the Supreme Court directed that judgment be entered in favor of the lessor. The court held as a matter of law that because the lessor's termination of the lease was expressly permitted by the lease and clearly within the parties' expectations, such conduct could never violate an implied covenant of good faith and fair dealing. [emphasis added] (Carma, supra, 2 Cal.4th at pp. 351, 371-376, 6 Cal.Rptr.2d 467, 826 P.2d 710.).

That's wht you are up against here. You are in a place in the contract where the seller has performed everything that the seller has promised to performed, and seller is now waiting for you to perform. The seller has the right under the contract at this point to terminate the transaction. As a matter of law, seller's decision cannot be due to a lack of good faith. This gives seller the "high cards."

Now, what can you do about this situation? This is what I have come up with, and it's something that I believe a judge would view at least favorably enough to allow the case to go to trial -- which is what you want, because it means that you and seller could be tied up in court for a very long time -- and that could force a settlement, assuming that seller has competent legal counsel (if he doesn't, then he will ignore you, and you'll have to sue -- which under the CAR-RPA requires mediation, followed by arbitration, assuming you initialed everything).

Seller is offering you an opportunity to save the deal at a price. That price is high. It may be too high (legally unconscionable). If it is, then you could get an order from a court forcing the seller to restore to you the difference between a fair price and what would be an unlawful contractual penalty.

A California court will refuse to specifically enforce a contract, or any clause of a contract, that is found to be unconscionable at the time it was made. Civil Code § 1670.5. Civil Code §1670.5 applies to all contracts, not just those for the sale of goods. Armendariz v Foundation Health Psychcare Servs. (2000) 24 C4th 83. The court has the power to enforce the remainder of the contract without the unconscionable clause or to limit the application of any unconscionable clause so as to avoid an unconscionable result. Civil Code § 1670.5(a). See Little v Auto Stiegler, Inc. (2003) 29 C4th 1064, 1076.

Ordinarily, the contract would have been considered "made" when the last person who accepted signed the contract. In which case, you would be without recourse here, because you signed the liquidated damages clause, so as to avoid any unconscionable result. But, seller's demand for $250 per day is an offer to modify the contract, and that takes the liquidated damages clause, at least somewhat, "off the table" -- because the modification will be made on the date that you accept seller's terms. This gives the court the option of determining whether or not the $250 per day demand is unconscionable.

In general, a liquidated damages provision will be considered unreasonable, and therefore unenforceable, if it does not bear a reasonable relationship to the range of actual damages that the parties could have anticipated would flow from a breach. The amount established as liquidated damages "must represent the result of a reasonable endeavor by the parties to estimate a fair average compensation for any loss that may be sustained. In the absence of such relationship, a contractual clause purporting to predetermine damages 'must be construed as a penalty.'" Ridgley v Topa Thrift & Loan Ass'n (1998) 17 C4th 970, 977.

Civil Code § 3275 reflects the equitable rule against forfeitures, by providing relief from forfeiture even if the party seeking relief has breached the contract. It states that:

Whenever, by the terms of an obligation, a party thereto incurs a forfeiture, or a loss in the nature of a forfeiture, by reason of his failure to comply with its provisions, he may be relieved therefrom, upon making full compensation to the other party, except in case of a grossly negligent, willful, or fraudulent breach of duty.