Time is of the essence

Sam Schneiderman, Broker-owner of Greater Boston Home Team continues his Monday series:

Many offers and Purchase and Sale agreements contain the words "time is of the essence". Those words give legal teeth to the deadlines (also known as the "time for performance") in those agreements. If deadlines are missed by a buyer or seller, consequences are typically spelled out in the offer. For a buyer, consequences can range from losing the ability to request repairs after an inspection to losing one's deposit money and losing the ability to purchase the home, too, if the seller elects to exercise his legal right to collect on the consequences. For a seller, failure to perform on time can cause him to be sued or the buyer might be able to back out of the deal.

While some consequences may seem harsh, failure to meet deadlines can cause monetary and other damages to buyers or sellers. Therefore, most real estate contracts include consequences that should motivate the average buyer. For example, if a buyer comes to a closing a day late, the seller may lose his ability to purchase his new home with the proceeds of his sale. Therefore, consequences usually include the seller's ability to cancel the sale and keep the buyer's deposit.

In most cases, the buyer is the one with the most to lose. Let's say that a buyer puts up a $1,000 deposit with an offer and agrees to sign a Purchase and Sale by the following Thursday at noon. The buyer that shows up at 2pm could learn that her deposit has been claimed by the seller and the seller has moved on to accept an offer from another buyer.

In the real world of real estate, there are legal nuances that can sometimes reverse the outcomes described above, but no buyer should ever get to that point in a transaction.

An offer might contain a time for condo document delivery, review of documents, completion of inspections, seller notification of inspection results, filing a mortgage application or obtaining a mortgage commitment, among others dates for “performance”. Despite clearly spelled out consequences for failing to meet deadlines, it is fairly routine for buyers and sellers to disregard them and put themselves in jeopardy in many transactions.

Agents and/or attorneys that push their clients and/or customers to meet deadlines (to avoid penalties or losing the property) are sometimes accused of pressuring the client, when in fact, the agent is actually trying to PROTECT the client from harming herself. Buyers and sellers should be aware that it is their job to monitor deadlines because not all agents and attorneys monitor deadlines for their clients.

Perspective:
Any time a deadline is missed, someone is putting something at risk.

Deadlines should be met or the other side needs to be properly notified up front along with a request for a deadline extension and the return of the deposit, if applicable.

Notification needs to be made EXACTLY as stipulated in the offer in order to be legally valid. For instance, a call to the listing agent requesting repairs after an inspection may not protect the buyer's deposit if the offer stipulated that the seller was supposed to be notified in writing.

Have you ever had a problem in a real estate transaction because a buyer or seller missed a deadline?
Agents and attorneys; do you monitor deadlines for your clients?
Do you think that buyers and sellers pay attention to the deadlines?