Who Should Pay Cancellation of Laundromat Escrow Fees?

Here’s a question that might provoke different responses. It involves the frequent cancellation of escrows prior to closing after errors, mistakes and records are found to be different than originally provided to a potential buyer.

Although some parts of the country do not use escrows, use attorneys, or use letters of intent, so this post might not be worth your attention, but I believe it is an issue that faces many buyers, sellers and brokers.

A common practice for real estate brokers selling laundromats is to refuse to provide due diligence information and records until an offer to purchase and a deposit has been made by a potential buyer. The deposit is then used to open an escrow. The reasons that this escrow is opened so early has a variety of reasons but one is certainly that it locks a buyer into a purchase.

Now the records are gathered together by the seller and the broker and provided to the seller. Sometimes the records support the original information about the site and sometimes it does not. Perhaps the landlord refuses to provide options, or the cost of repairs is under estimated and other times the income cannot be verified.

As a result, buyers may want to back out the escrow and want a return of their escrow deposit. The escrow company has incurred costs and requests payments from both the buyer and seller in order the cancel the escrow and return the escrow deposit to the buyer. Both buyer and seller have to sign cancellation documents in order for the escrow agent to refund the deposit money to the buyer.

?Here comes the rub. If the buyer backs out without a reasonable basis, it seems fair that the buyer should bare the cost of escrow cancellation fees. But what did the seller do wrong? Why are they billed?

If the cancellation is a result of the information and records not matching the original information that was used by the seller and broker to induce the offer to purchase, why should the buyer have to pay anything. Maybe the fees should be totally paid by the broker or the seller, depending on who provided the misinformation to the buyer.

Of course, if brokers had all the paperwork available prior to making an offer or placed a provision in their offers to purchase such as “buyer instructs the broker to hold the deposit check uncashed until all due diligence contingencies have been removed and then deposited into escrow.” ?I’d love to hear from those who’ve had this experience and from those who have opinions on the proper party that should be responsible for escrow cancellation fees.