Realtors can use all sorts of acronyms, buzz words – stuff that only those of us in the business understand. COE stands for Close of Escrow. The +1 (or 2 or 3) means the seller gets to stay in their (former) home after escrow has closed – meaning it’s now on the buyer’s dime! But why would a seller want to stay in their (former) home after escrow has closed? And why has the “17 day thing” changed all the old ways of doing things?Back not that many years ago (2002), when a buyer and seller entered into their purchase agreement, the deal generally was contingent on the buyer getting a loan. Murphy’s law being as it is, if a buyer was running into issues with the loan, it really didn’t come down to crunch time until a few days before escrow was due to close.

Say escrow was due to close on Friday. The seller had the movers coming in on Wednesday and Thursday and the place was spic and span for the buyers when escrow would close the next morning, Friday.

Ah – but around Monday or Tuesday, things just aren’t working out with the loan. But the loan rep and the buyer’s agent are pedaling furiously to keep the deal together, hoping against hope they can still pull it off.

But alas, on Wednesday afternoon, the loan rep tells the buyer and the buyer’s agent there’s no way they can make the loan, and the phone call no one wants must now take place. The buyer’s agent calls the seller’s agent to say the loan fell through and the deal is off.

Lots of very angry people.

Thus the invention of COE+1 (or 2 or 3). Only when the loan was “funded” (loan proceeds wired to escrow on Thursday) were all parties assured the deal would close on Friday. Now the seller had full assurance it was okay to move out, and had a couple of days to safely do it. Obviously, if the loan didn’t fund, the seller didn’t move out.

But all that changed in November, 2002 when the “17 day thing” came into being. This change to the purchase agreement altered the rights and responsibilities of both the buyer and the seller.

First, a buyer buys the home “as is” – but has the right and obligation to have a thorough inspection of the home, plus get complete disclosures from the seller (unless it’s a bank foreclosure).

We tell both buyers and sellers they don’t have a “deal” at this point, because the buyer can walk at any time. This is merely the time for the buyers to do their due diligence. We say the buyers are merely “dating” the sellers.

But to open escrow, the buyers put cash into escrow (called variously earnest money, security deposit, etc). The amount often is stated up front in the MLS listing. It can be 1 – 3% of the purchase price, a fixed dollar amount, etc.

In addition to the inspection and due diligence, the lender also has an appraisal on the home. Once all that work is done and the lender unconditionally agrees to make the loan, and the buyers and sellers have agreed on the condition of the home (and possible negotiated repairs), the buyers “release all contingencies”. This is big!

Now the buyers and sellers are “married”. If the buyers back out now, like a divorce it’s expensive, painful and messy. The seller gets to keep the deposit as “liquidated damages”.

Now both buyers and sellers know up front it’s a “done deal” and we no longer see the COE+1. It’s a much cleaner process now, and has helped to eliminate a lot of angst, pain and frustration.