Realtor® Legal Tip – When should the Buyer get the keys?
April 16, 2018
Author: Curtis Bullock
Here’s an actual case I once dealt with.
The property goes under contract with a Buyer who is an investor. It is a smooth transaction and on Friday afternoon, the day of Settlement, the Buyer asks the Listing Agent if he could get a set of keys. The Listing Agent says, “sure here you go.” Over the weekend, the Buyer rips out the carpet, paints the interior walls and starts making other significant renovations. Monday is a holiday. Tuesday morning, the Lender calls and informs the Buyer’s Agent that they will not be able to fund the transaction (*the reason why isn’t important here). Upon hearing this, the Buyer becomes upset and an argument erupts between the Buyer and Seller. The Buyer asks the Seller to reimburse the Buyer $10,000 for the paint and new carpet. The Seller argues that had they known the Buyer was going to start renovating the home over the weekend they would never have been given the keys. The Listing Agent and Seller regret giving the Buyer the keys on that Friday afternoon. What are the issues here? How can this situation be avoided?
The important thing to remember here is to know the difference between “Settlement,” and “Closing” and how that relates to “Possession” as defined in the Section 3.1, 3.2 and 3.3 of the REPC. The REPC also states that Closing (i.e., Funding & Recording) must take place within 4 calendar days after Settlement. Since Friday was the day of Settlement, in this transaction it was possible that Closing might not take place until Tuesday, the day after the Monday holiday. And that’s exactly what happened.
The lesson learned here is to not give the keys to the Buyer until the transaction Closes which means “Funding & Recording.”
Also, remember to educate your Buyers and Sellers on the differences between “Settlement” and “Closing” so they better understand how the process works and you can avoid this type of legal problem.