If you think the slog of going out week after week to find a house, and then beat competitors, is a marathon, get ready for the sprint.
Once a seller accepts your offer, the clock starts ticking on all the things you must do to be ready for settlement. Failure to meet any of the deadlines outlined in the sales contract could result in not only losing the house, but possibly your deposit.
If your contract has a “time is of the essence” clause, it is a notice to both parties that failure to complete a required performance by a date set forth in the contract will constitute an incurable breach. And real estate contracts are full of timelines.
The numerous chores that lie ahead include applying for and securing financing, obtaining homeowners insurance, obtaining and reviewing homeowner or condominium association documents and scheduling an independent inspection. You may even be required to make a second deposit by a certain date.
Many agents give their clients a list of timeline contingencies that must be met, so you should begin setting up appoints right away.
Sometimes, though, agents drop the ball, leaving the seller’s agent to pick up the baton. Most may gripe a bit that they have to do the other side’s job, but they usually do so to preserve the deal and save their commissions.
That’s what happened to broker Tammie White of Franklin (Tennessee) Homes Realty some years back. Beset with title issues, the seller twice asked for extensions. But during both add-ons, not a word was heard from the seller’s agent, White posted on ActiveRain back then. So her client found another house.
Only the day after the broker notified the seller’s agent that her client wanted his deposit back did the agent tell White his client was ready to close. Too late. The deal was dashed. Later in the same week, it happened again, only this time White was working on behalf of the seller, and the buyer had missed the deadline for signing a repair amendment.
Completion dates are not suggestions, nor are they “guidelines” that can be bent or broken. “They are designed to protect buyers and sellers,” White advised. “They shouldn’t be neglected or left to expire. All parties must be aware of the dates and make sure the corresponding documents have been properly signed. When they have not, you may wake up to realize that the contract is null and void.”
All contracts are different, and none of this should be taken as legal advice. But as an example of how this can work, the standard contract in Pennsylvania allows a seller five days from the end of the inspection clause to respond. So if a buyer submits an addendum with their demands on the ninth day of a 10-day deadline, the seller has six days to reply.
Most states contain at least one milestone. But at least one, Massachusetts, has two key deadlines. Here, according to broker Matt Dolan of Sagan Harborside Sotheby’s International Realty in Marblehead, the two-step process involves an accepted offer, followed by an inspection and then a purchase and sales contract that’s a more detailed version of the offer.
One of the most troublesome deadlines has to do with the inspection contingency. Although any number of days can be written into the contract, buyers typically have seven to 10 days to find an inspector, receive the report and notify the seller of what repairs, if any, are being requested. (Unless stated otherwise, “days” usually means calendar days, not business days.)
If the buyers miss the deadline, they likely would be required to proceed with the transaction, even if the inspection reveals major issues that the buyers really do not want to contend. Either that or, if they decide not to proceed with the sale, they could lose their entire earnest money deposit.
Now let’s say you’ve had the inspection and handed over a list of items you want the seller to repair, all within the allotted time frame. At this point, the seller has however many days written into the contract to respond. The work doesn’t have to be performed within that period; rather, the reply is about whether the seller agrees to have the repairs done by the closing date.
Perhaps the seller will agree to do all the work the buyers request, or maybe just some of it. Maybe they’ll agree to set aside a certain amount at closing to cover the costs so the buyers can get the work done at their leisure. Or perhaps they’ll say no to everything. Then it’s back to the buyers to decide how they want to proceed, again within the contract specified time limit. It all makes for a rather hectic couple of weeks.
Applying for financing is another key deadline. Applications must be submitted within the time stated in the contract, and a lender’s approval must be received within so many days afterward. Realize, though, that the lender won’t order an appraisal until the inspection back-and-forth is resolved.
But if you miss the mortgage application deadline, the seller could accept an offer from someone else. And they could keep your deposit as compensation for taking their place off the market while waiting for you to fulfill your end of the bargain.
Although obtaining homeowners insurance is typically not part of the sales contract, it is a lender requirement that must be met prior to closing or the closing will be delayed. You should be reminded of this by your agent or loan officer. But don’t drop the ball, even if they do: Call your insurer as soon as you can to get things rolling.
The seller is responsible for providing HOA documents within a certain time — again, as outlined in the contract. And then the buyers have so many days to review the papers. If the buyers find something objectionable, they can back out. But if they missed their deadline, they could be forced to move the sale along.
Finally, there’s the closing date, the day everyone should be shooting for to sign all the necessary papers and transfer the keys to the new owners. That date is subject to negotiation, but once agreed upon and written into the contract, it should be your target.
Closing can always be pushed back a few days by mutual consent. But if you haven’t dotted all your I’s and crossed all your T’s, you could be stuck with a truck full of furniture and a car full of kids with nowhere to go.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at firstname.lastname@example.org.