Generally a Cure Notice must be given before a party is entitled to damages
FACTS: The buyer and seller executed an Arizona REALTORS® Residential Resale Real Estate Purchase Contract (the “Contract”) with a close of escrow date (“COE Date”) of December 31, 2023.
The buyer did not close escrow on December 31, 2023. The seller will now have significant tax consequences. The seller wants the buyer to pay for the additional taxes the seller will have to pay and does not want to sign closing documents until the buyer agrees to go through arbitration. The buyer is now ready to close escrow.
ISSUE: Can the seller require the buyer to go through arbitration prior to closing because the buyer failed to adhere to Section 2b of the Contract, thereby failing to give notice to the seller that he did not have loan documents on time to close?
ANSWER: Probably not.
DISCUSSION:
Section 2b of the Contract provides:
No later than three (3) days prior to the COE Date, Buyer shall either: (i) sign all loan documents; or (ii) deliver to Seller or Escrow Company notice of loan approval without PTD conditions AND date(s) of receipt of Closing Disclosure(s) from Lender; or (iii) deliver to Seller or Escrow Company notice of inability to obtain loan approval without PTD conditions.
Here, the buyer should have signed loan documents three days prior to the COE Date. When the buyer failed to sign by the deadline, the listing agent could have sent a Cure Notice. The buyer would then have three days to Cure, and still close by December 31st. If the buyer needed an extension to close escrow past the 31st, then the seller would have been in a position to negotiate additional terms to help defray costs the seller incurred as a result of the buyer’s delay.
Because no Cure Notice was sent by the seller, the buyer and seller must proceed toward closing. The seller cannot require the buyer to go through arbitration as the buyer will be able to close prior to expiration of the three (3) day cure notice period.