• Tom Grisak

Never Release the Key to the Buyer Before the Home has Closed AND Funded

One of the best ways to find yourself in a lawsuit as a listing agent is releasing the key to the buyer or buyer agent before the home has officially closed AND funded. There is a difference between the two.

A home can "close", which means all parties have signed off on the transaction, but that doesn't mean the property has funded. Funding occurs when the title company receives the proceeds from the buyer and sends it to the seller.

Many years ago I listed a home which closed, but the buyer had the rug pulled out from them at the last second by their lender. The lender changed their mind on the terms of their agreement (and there is never consequence to them for doing that) but it meant the buyer couldn't close.

Unfortunately, the seller didn't listen to me and vacated the home after signing a new lease. Luckily I had saved my correspondence advising them not to sign anything that wasn't contingent on their home home closing and funding and not to vacate the home until the money was in their account.

The seller tried to blame me for their misfortune but calmed down when I sent them our correspondence and my advice. The home did fund a couple of weeks after the closing. The buyer found another lender, but it was tense for awhile.

If you, as the listing agent, give permission for the buyer agent to remove the key from the lockbox and give it to the buyer or hand the key to the buyer yourself before the seller has their money, you are opening yourself up to a potential lawsuit. If the buyer starts to move in prior to funding, your seller might have a very difficult time getting them out.

Chances are, the buyer has nowhere else to go, so how motivated are they going to be to vacate the home immediately? The seller can't even show the home with their new, unwelcome occupier in the home. In some states it can take months to remove unwanted occupants from a home so who do you think the seller is going to blame if you released the key to them?

Just because everything has gone smoothly up to the day of closing and funding you should never assume the home is going to fund. If the buyer asks for permission to move their personal items into the home before the property has funded, just say no.

The buyer agent has no right to take the key out of the lockbox and give it to the buyer without permission from the seller either. If they do that, they're also opening themselves up to potential litigation from the seller if things go badly.

Bottom line, the best rule of thumb is neither the listing agent nor buyer agent should EVER give the key to the buyer without the express consent of the seller. It should always be kept either in the possession of the agents or in the lockbox.

By the way, if the seller believes it isn't a big deal giving the key to the buyer after the home has closed but not yet funded, I still believe it's your duty as their listing agent to explain to them the potential ramifications. If they decide to release the key to the buyer, it's their call.