Important Timelines and Deadlines in a Real Estate Contract for Divorcing Couples is slightly more complex than for more buyers, below is some guidance for Main Line PA couples. For most buyers and sellers, the primary focus in a real estate contract is limited to just two pieces of information – the sales price and the closing date. If you are considering selling your home on The Main Line PA, how much the house will be sold for and when you’ll need to move are indeed the most important aspects of a contract, but when you are also divorcing, the other dates become equally important. I have helped many friends navigate the maze of legalities when dividing property.
Now, getting back to the contract, the remaining 50 or 60 pages in the typical contract can contain a veritable minefield of potential pitfalls, as well as numerous contingencies and inspections that could make the difference between a good deal, a bad deal or no deal at all. For example, on page 1, sellers might see a price that puts a smile on their face, only to find that buried back on page 30 the buyer wants a bunch of closing cost help, which is essentially the same as lowering the price.
In other cases, the sales price and settlement date might be fine, but the contract is chuck full of contingencies that could string out a seller, allowing the buyer to withdraw from the contract, with no penalty, right up to the day of settlement.
Although that might give the buyer a lot of flexibility, a seller may have invested in a new place to live and packed up their stuff, only to find that the buyer has changed their mind. Most of the contingencies must be completed within a certain number of days from the date of contract acceptance.
Let me take you through the contingencies commonly found in contracts, including the number of days usually allowed for the completion of each contingency.
Financing
Nearly all real estate contracts have a financing contingency. In paragraph 10, on page 2 of the contract, it identifies the number of days the buyer has to make financing application and the number of days for securing financing commitment.
Making an application is easy, and we usually see something like seven days for this. Financing commitment is more time consuming and can often take 30 days or more, but it would be unusual for it to take much more than 45 days.
With respect to financing, there are a couple of things that buyers and sellers should keep in mind.
First off , loan approval doesn’t always mean the loan is approved. Lenders almost always qualify a letter of loan approval with numerous qualifiers and stipulations.
Second, a buyer cannot sabotage their own financing. If a buyer does not make a good faith effort to pursue financing or provides false information to a lender, the financing contingency will not allow them to escape from the contract.
Third, make sure your agent follows-up on the due date for financing approval and gathers the paperwork necessary to prove that the contingency has been met. Many agents aren’t good about this, and a contract could suddenly be in big trouble if the money doesn’t show up in time for settlement. Lenders have their own timelines, and it’s hard to make up lost ground if a buyer has been remiss about securing a loan.
Home inspections
Without a doubt, home inspections are one of the most frequent reasons a contract fails to reach settlement. The MAR Property Inspection Addendum is four pages long. It allows the buyer to specify what types of inspections they want to do and the number of days they have to complete these inspections.
Some inspections, like mold or radon, might take a bit longer than others, because laboratory tests might be required. Buyers want to give themselves plenty of time for inspections; whereas, sellers want that time to be as short as possible.
If home inspection issues are going to cause a buyer to withdraw, sellers want to know that quickly so they can get their property back on the market and find another buyer.
In most cases, it’s reasonable for home inspections to be completed within 10 to 14 days. Once the buyer has notified the seller of what repairs (if any) are requested, the seller then has five days to respond.
If the seller says they’ll fix everything, the contract moves forward. If the seller says they’ll fix some or none of the items requested, the buyer then has two days to decide if they want to terminate the contract or accept the seller’s response.
Appraisals
Even if a contract of sale isn’t contingent on financing, it might be contingent on an appraisal. In the first paragraph of the MAR Appraisal Addendum, it says, “The appraisal shall be ordered by Buyer within (x) days of the Date of Contract Acceptance.”
The key word here is “ordered.” Ordered is not the same as completed. In fact, nowhere in this addendum does it say how long the buyer has to complete the appraisal or the date by which it must be done.
If there is a financing contingency, completion of the appraisal must fall within the deadline for financing approval. But, if there is no financing contingency, then a specific date, or number of days from contract acceptance, must be set to have an “end date” for this contingency.
Other deadlines
For buyers, there’s often a desire to fashion a contract so that there are ways to get out of it. For sellers, their goal is just the opposite. They want to an air tight agreement to keep buyers from jumping ship and wasting their time.
In many contracts, there are two other deadlines that can give buyers a “get out of jail free” card. One is in the Home Inspection Addendum, and the other pertains to properties in Homeowner’s or Condominium Associations.
Homeowner’s or Condominium Associations
If paragraph 5B of the Home Inspection Addendum is initialed by both the buyer and seller, then the “Buyer, upon written notice to the Seller given within the time period specified for each inspection contingency shall have the unconditional right to terminate the Contract for no stated reason, based upon the Buyer’s general dissatisfaction with the inspection results.”
So, if you’re a seller, you might think twice about agreeing to this part of the inspection addendum, since no stated reason means just that – no stated reason.
If the house is part of a homeowner’s or condominium association, the seller must provide the buyer with a long list of information about the rules, regulations and financial condition of the association. The contract specifically identifies what must be given to the buyer.
Once the buyer has these materials, they have five days for a homeowner’s association and seven days for a condo association to determine whether or not they want to continue with the contract. And again, so long as the buyer responds in this time frame, they “do not need to state a reason” for cancelling the contract. Consequently, sellers should get this documentation to the buyer as soon as possible, because the clock doesn’t start ticking for the buyer’s five/seven days until they have actually received “all” of the information.
As you can see, dates, deadlines and the number of days you have to do something in a real estate contract can mean the difference between a successful transaction and one that doesn’t work out like you thought it would. Plus, all real estate contracts are “time is of the essence” contracts. That means close “doesn’t” count. If you miss a date or a deadline, by even five minutes, you’re in default and the other party can declare the contract null and void.
So, when you get into a contract, make sure your agent keeps you on schedule and keeps you apprised of these important timelines and deadlines. The consequences of not doing so can be catastrophic.
If you found Important Timelines and Deadlines in a Real Estate Contract for Divorcing Couples useful, please click here for more information on this topic. I’m Kimmy Rolph and I specialize in downsizing and transitions, just like this one. Let’s take this next step together. Kimmy Rolph Sells the Main Line and Local Areas.
