I would contact a real estate attorney in Irvine if I were you. If I understood what you said, you indicated that what the buyer now wants in writing has already been done. Looks like an attempt to stall and then to ask for her down payment back. Good luck.
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I am not a CA attorney, laws vary from state to state, therefore you should always consult a local attorney.
Your buyer is required to follow the contract of sale. I'd wager there is nothing in the contract of sale that would permit them to make this demand. You could make a time of the essence closing to force them to close.
Having said that, if you have already made the repairs and removed the trees, what is the downside to signing a release? Your buyer would not be responsible for any event that occurred prior to his or her purchase of the home. Liability is premised upon when the damage occurred - not when it was discovered. Thus, the buyer would not be liable for after discovered damage anyway. You are not really giving anything up.
You should consult with a local real estate attorney.
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It depends on the purchase and sale agreement, the escrow instructions, all the facts involving the issue with the neighbors and other matters that you should discuss with a local real estate attorney.
Ask the neighbors to sign a release. That should satisfy the buyer.
Even so, you would want an attorney to prepare any release and review the documents before signing anything.