Congratulations! You have found the home of your dreams, the seller has accepted your offer and you have signed an Agreement Of Sale. The clock is now ticking and that process starts with the execution date of the contract. The execution date is the day upon which all changes to the agreement of sale have been made, and signatures and/or initials of all parties have been obtained. The execution date also revolves around the delivery of the executed, signed, contract to agents involved in the transaction. Delivery to the agent constitutes delivery to the client, and in today’s digital age, delivery most of the time is in the form of an electronic transmission via Email or fax. It is common practice that buyers are the first to sign the contract and first to initial any changes. Once the buyers have affixed the proper signatures/initials the seller then signs/initials, and the contract is delivered to the buyer’s agent. The execution date also is dependent upon the receipt of consideration, the delivery of an acceptable form of deposit money, the form of which is most always a check. Without consideration there is no contract.
Time is of the essence in a contact. This means that all dates and time limits within a contract must be met in order to avoid being in default on The Agreement Of Sale.
Let’s review the major day milestones associated with an Agreement Of Sale. Standard contract defaults for time will be used in this example.
DAY 1
The day after the execution date is referred to as day 1 of the contract. This date forms the basis for which all future dates in the contract are dependent upon. It is the first full day after the execution date. If a contract is signed and delivered at 10:00 PM, day 1 is the next day, not the day the contract is signed and delivered. The contract clock is a seven day clock, and all days are included when calculating time. Holidays and weekends are included in the counting.
MORTGAGE APPLICATION- 7 DAYS
The standard time frame for a buyer who requires mortgage financing to apply for a mortgage is 7 days. The contract stipulates that the buyer must meet with a mortgage lender and make a formal application for a mortgage in this time period.
INSPECTION CONTINGENCY – 10 DAYS
The standard time frame for the buyer to perform inspections is 10 days. In this time period the buyer must perform all inspections, and craft what is known as a Reply To Inspection, which details what actions the buyer wants the seller to take as a result of the inspections – repairs, credits, or reduction in sales price. The amount of time for inspections must take into consideration the most difficult and time consuming inspections being considered, and the time it takes for the inspector to provide a full report of the inspection results. For example a stucco inspection – today it can take weeks for the results of a stucco inspection to be ready. Failure to act upon inspection results within this time period may result in the waiver of the inspection contingency, and acceptance of the property regardless of the inspection’s findings.
SELLER RESPONSE TO INSPECTION – 15 DAYS
The seller has 5 days from the end of the Inspection Contingency period to respond in writing to the buyer regarding the Reply To Inspection. Since the normal Inspection Contingency period is 10 days, 15 days is the time frame for a seller response.
RESALE CERTIFICATE AND ASSOCIATION RULES – 15 DAYS
If the property being purchased is part of a homeowners association, or a condominium the seller must order what is known as a Resale Certificate and the associated Rules and Regulations for the community within 15 days.
MORTGAGE COMMITMENT DATE
The Mortgage Commitment date is not fixed to the execution date of the contract. Calculation of the date should take into consideration the particular practices and procedures of the lender involved.The commitment date is the day on which the mortgage lender must produce what is known as a Commitment Letter granting conditional approval for the loan. If the commitment date is not met the seller has the right to terminate, in writing, the agreement.
Time frames are negotiable in the process of negotiation. The standard time periods are generally sufficient for most transactions. Consider any special circumstances and conditions that apply to you as you negotiate the terms of your agreement.
Your agent should inform you of all the relevant dates and time frames that are critical in the contract. It is good practice to review the dates with your agent and put them in writing so as not to miss any milestones. Remember you have entered into a legal contract, and in doing so a contract requires specific performance of the tasks outlined in a timely manner, or else bad things can happen.
