If there were no time limitations on the purchase contract for a real estate deal, the sale would run the risk of never closing. Setting deadlines allows the buyer, seller and lender to work on the same schedule and assure that critical events leading to the closing take place in sequence. This schedule is negotiated and laid out in purchase contracts. Buyers need time to secure their financing and arrange to move, and sellers may want to negotiate a closing date that allows time to locate a new property. These different needs often conflict with one another.
Review all offers quickly and carefully, if you are the seller, because you face the first deadline in the contract, which is the contract acceptance deadline. Either accept, decline or counter the offer, but do it in line with the specific day and time as listed on the purchase contract.
Refer to the sequence of events and deadlines on your contract often, because they may vary from contract to contract. The seller is usually tasked with quickly delivering property disclosure information and off-record matters, as well as delivery of a commitment to title insurance, common interest community documents and notice to any other buyer who may have a first right of refusal.
Deliver the earnest money with the offer or before the early deadline if you are the buyer. Once title information, off-record matters and common interest community documents are delivered, buyers face a deadline for declaring any objections to information they received.
Anticipate forthcoming documents and procedures. Buyer credit review, loan application, loan conditions, disapproval of buyer’s credit, existing loan documents (if a loan assumption is a consideration) and loan transfer approval are next on the schedule.
Complete the home inspection prior to the deadline if you are the buyer, and expect the seller's remedy response by their deadline. These deadlines are often listed early on the schedule of events. If there are issues with the property that cannot be resolved, neither party will have wasted too much time.
Approach each deadline with care and planning to be sure contractors are available in time. Make sure the deadlines allow enough time to arrange such things as a survey, if needed. Know that some objection deadlines may need additional time to resolve. Other important deadlines later on in the schedule include the buyer's loan approval, appraisal, appraisal objection and loan commitment leading up to the closing. The closing date and time are also designated in the contract.
Inform the other side quickly if you are not going to be able to meet a deadline on the contract so that you can work out a solution.
• If either party does not perform a task required in the contract by the deadline, they are considered in breach of the contract.
• The penalty for a buyer not performing to the contract is usually limited to “liquidated damages,” the loss of earnest money. • Sellers face a penalty of “specific performance,” meaning the seller must follow through with the contract or be ordered by the court to do so.