The Late Disapproval, the Missed Inspection Window, and the Frozen $6,000
Ana signed an offer on a two-flat at 1907 Westview on Monday, March 3, at $287,500, and the seller counter-signed the same day. The contract is the standard multi-board form with a five-business-day attorney review period ending at 5:00 p.m. on the fifth business day after acceptance, a ten-calendar-day inspection period, and $6,000 earnest money "due within three business days of acceptance." Ana's attorney was on vacation and emailed a written disapproval at 9:14 a.m. on Tuesday, March 11. Ana's inspector found active knob-and-tube wiring with a $9,000 repair estimate, but Ana never delivered a written inspection notice. The $6,000 was wired March 12. The seller now refuses to sign any release and demands that the broker hand over the earnest money. Assume no weekends or holidays fall outside the normal pattern.
1. Was the attorney disapproval timely? Walk through the counting.
Read the worked answer
No - it was one business day late, and the contract is binding.
Counting business days after Monday, March 3:
| Business day | Date |
|---|---|
| 1 | Tue, Mar 4 |
| 2 | Wed, Mar 5 |
| 3 | Thu, Mar 6 |
| 4 | Fri, Mar 7 |
| 5 | Mon, Mar 10 |
The review period expired at 5:00 p.m. on March 10. The March 11 email is ineffective, even though it was written disapproval in the proper form - timing, not substance, is what failed.
The practical consequence: Ana cannot use attorney review as an exit. She is bound to buy unless some other provision of the contract gives her a right to terminate. Note also that "written disapproval" must be delivered as the contract requires (email/notice provision); an attorney who drafts but does not deliver in time has done nothing.
2. The inspection period ran ten calendar days from acceptance. What are Ana's options on the knob-and-tube wiring now?
Read the worked answer
The inspection contingency has lapsed, so the property is contractually accepted in its present condition.
- Ten calendar days from March 3 ends March 13. Without a written notice of defects delivered inside that window, the standard form treats the buyer as having accepted the condition of the property. Ana's $9,000 wiring problem is now her problem.
- She can still ask the seller for a credit or repair - a request costs nothing - but the seller may refuse with no consequence, and Ana cannot terminate for that reason alone.
- She cannot convert the lapse into an exit by arguing she "would have" objected; the contingency is a deadline, not a fairness standard.
- The exception worth checking: disclosure. If the Illinois residential property disclosure stated no known electrical problems while the seller knew the wiring was live knob-and-tube, Ana may have a separate misrepresentation claim that survives the contract's as-is clause. That is a lawyer question - the licensee's job is to get the disclosure and the inspection report to the attorneys quickly.
Lesson the case is testing: an unexercised contingency is not a safety net. Once the date passes, leverage transfers to the seller.
3. Can the broker release the $6,000 to the seller on demand? Can it return it to Ana?
Read the worked answer
Neither. The broker holds the money as a neutral escrow agent.
- The earnest money is not the broker's money, and the broker is not a judge of who breached. A seller's demand, standing alone, authorizes nothing.
- The funds stay in the escrow account until (a) both parties sign a written release directing disbursement, or (b) a court order or an arbitration award under a contract arbitration clause says where they go. If the parties remain deadlocked, the broker may file an interpleader and let the court decide who is entitled to the money.
- The late wire is a separate issue. The buyer missed the three-business-day deposit deadline, which is a contract default the seller can point to - but the seller accepted the funds and continued to perform, which cuts against treating that default as a termination right. The broker should document the delivery dates and the seller's acceptance rather than opine on the legal effect.
- Licensee takeaway: never let a client's attorney, a pushy seller, or office staff talk the brokerage into paying out escrow on a promise. Paying the wrong party puts the broker's license and the escrow account at risk.