Real Estate with Dallice: Contract Deadlines keep your Earnest Money safe!
The Contract to Buy features an impressive box of dates and deadlines on page 2. It might seem a bit overwhelming at first. So many things to do, so little time… right?!
How do you eat and elephant? One bite at a time.
Under the direction and guidance of your Realtor, these deadlines will come and go almost peacefully, assuming you have done your homework. As a buyer, they are here to serve you and you may even come to feel grateful for them.
Types of Contract Deadlines
Deadline by which to receive information or to have completed a task.
Under this category you’ll find:
- Loan Application
- Title work – recorded info about the title of the property. For example: liens
- Off-record information – Information not of public record, that the seller has. For example: existing lease
- Homeowners Association Documents – The seller will provide you with access to financials/budget, covenants, restrictions, bylaws, meeting minutes etc
- Sellers Property Disclosure – Info about the property the Seller gives you, such as age of furnace, history of water leaks etc
- Appraisal – ordered by the lender if you are getting a mortgage
- Survey – ordered by you if you want/need one
- Property Insurance – your research
- Due Diligence Documents – Items like warranty paperwork, paid invoices, building plans the Seller has in their possession
Dates by which you can either object to something discovered and terminate the Contract/renegotiate with Seller. After this date, you cannot use this reason to Terminate the Contract.
Under this category you will find:
- Title Objection. For example you could discover that there was a deed recording error during probate that might take a few extra weeks to correct.
- Off-Record Objection. For example you learn that there is lease with a term that is too long for your liking.
- Homeowners Association Termination – there is no renegotiation with Seller about this because they are not able to control or change HOA rules or budget etc. For example, you learn that you cannot park your boat outside your townhouse and that is a deal breaker for you.
- New Loan Termination. If you cannot qualify for the loan, this is the date by which you need to inform the seller.
- Appraisal Objection. If the appraisal was to come in lower than purchase price the Buyer can terminate the Contract or renegotiate with Seller.
- Survey Objection – Again the Buyer can terminate if for example it was found that boundaries are different than was expected, or the Buyer can object and start a negotiation with Seller.
- Inspection Objection/Termination. In the event Buyer is dissatisfied with the condition of the property or planned use of area or road noise etc they may terminate or ask the seller to make corrections to the property.
- Due Diligence Documents. If the Buyer finds something unsatisfactory about the documents received (or not received yet) they may file a written objection with Seller, asking them to correct the situation.
Resolution Contract Deadlines.
In the event the Buyer has OBJECTED at any of the above deadlines, there is a period of time, then a contract deadline for resolution. If resolution has not been reached by Buyer and Seller, the Contract generally is terminated.
These contract deadlines include:
- Title Resolution Deadline
- Appraisal Resolution Deadline
- Survey Resolution Deadline
- Inspection Resolution Deadline
- Due Diligence Documents Resolution Deadline
Contract Deadlines and Good Faith
Listen up. This is important, especially for Buyers. When you sign a Contract to Buy, everyone is working under the assumption that you want to get to Closing. Me, the Seller, Listing Agent, Escrow Officer at title company, Lender and everyone supporting us. A Buyer must make efforts to meet deadlines and to not sabotage the deal intentionally. And they certainly should not be shopping for an alternate property – this could be considered a breach of good faith.
Loan application must be made on time. Inspections should be conducted with the intent of satisfying oneself that the house has no surprises or safety issues – not to nickel and dime the Seller or play mind games! A buyer shall make all efforts to maintain the debt to income ratio/credit score that they had at Contract execution.
Sure, sure, it’s possible to some these deadlines as an “out” and the Seller may not know (or be able to prove) that good faith was missing. But let’s be clear… It is not a victimless situation. In this market, when a Contract is terminated on a listing, no matter what the reason is, the buyers that come after you will wonder what is wrong with the house. The Seller will likely lose money and/or time. They will stress about it, it will lower their quality of life, affect their ability to qualify or close on their next property etc.
Call me crazy, but I also believe what goes around, comes around. At the end of the day, when Buyer and Seller get to closing, there is something special in the goodwill that has been generated during a transaction that is friendly and respectful. This magic is lost when mind games, taking advantage of another persons circumstances or animosity has crept into the deal. And as a Buyer, you don’t need bad juju lingering about your new home! Moving in should be a fun and exciting new chapter.
Enough said. 🙂