A large part of the legal practice at OWM Law offices is representing Buyers and Sellers of real estate of all shapes, sizes, and values, both residential and commercial. When representing Buyers, we also provide title insurance and conduct the closing, as agents for Fidelity National Title Insurance Company. One of the biggest mistakes, or oversights, made by parties involved in a real estate transaction (i.e. Buyers, Sellers, Realtors, Mortgage Lenders, Inspectors, etc.) is not paying enough attention to the deadline dates that are provided in the Agreement of Sale.
When negotiating an Agreement of Sale, the Buyer and Seller are, understandably, focused on the purchase price…is it enough? Is it too much? Can I afford it? Maybe I am willing to pay what the Seller is asking, but I want to offer a little bit less to leave some negotiating “wiggle” room. All of those things are understandable concerns, but while the purchase price is obviously important, the deadline dates are equally so. In addition, the deadline dates provided for in an Agreement of Sale are not target dates, “be nice if we make” that date, etc…the deadline dates provided for in an Agreement of Sale are the essence of the Agreement and dictate the enforceability of same.
The periods in an Agreement of Sale are either dates certain (i.e. April 13, 2019) or are based upon a number of days after the date of the Agreement of Sale (i.e. “on or before fifteen (15) after the date of the Agreement”). I always prefer to use a date certain so as to avoid an argument over the exact date of the Agreement of Sale; what happens if the expiration date occurs on a weekend or a National Holiday, etc. The date of the Agreement of Sale can be a source of confusion. Is it the date at the top of the first page, Paragraph 1., Line # 1?!? Maybe, but what if that date is January 22, 2019, but the Buyer did not sign it until January 24, 2019 and the Seller didn’t accept the Buyer’s offer and sign the Agreement of Sale until January 31, 2019? What is the actual “date” of the Agreement of Sale? January 22, 2019? January 24, 2019? January 31, 2019? Technically, in the above scenario, the “date” of the Agreement of Sale would be the date that the last party signed it…January 31, 2019. That would be the date from which the days would be added to determine the exact deadlines.
The Settlement Date in Paragraph 4 of the standard Agreement of Sale is usually the most important date that people focus on. But remember, that date is the last date that the parties can settle…they can always settle before that date if they are both ready, all obligations have been fulfilled and the mortgage (if financed) is available. That date is extremely important and it is not a “would be good if we could make it” date. If the Buyer is not ready for settlement by that date, the Seller can “call” for closing and then deem the Buyer in default if the latter does not have the funds to complete closing. Once done, the Seller can retain the Buyer’s deposit. Do not make the Settlement Date too soon, in order to “impress” the Seller about the strength of your offer to purchase, or else you may be paying for an extension.
When making an offer to purchase, the Buyer needs to set a deadline date, on or before which the Seller accepts the offer or else it expires (Paragraph 5). If financing the purchase, the Buyer must make the deal contingent upon obtaining a mortgage. The deadline date by which a mortgage commitment must be received by the Buyer should be as close to the Settlement Date if you are the Buyer and as soon after the date of the Agreement of Sale if you are the Seller (if the former, to give you as much time to get your financing; if the latter, to find out as quickly as possible whether you are Buyer can really purchase the property). The Mortgage Contingency (i.e. Paragraph 8) also has specific dates within which the Buyer must apply for the financing, lock in interest rate, etc. and the Buyer must comply with these dates or else risk losing the protection of the mortgage contingency.
The inspection dates in the Agreement of Sale are also routinely ignored, treated as targets but not deadlines, etc. If you are the Seller, you want the Inspection Contingency deadline date to be as soon as possible after the Agreement of Sale is signed. If you are the Buyer, you want that date pushed out as far as you can negotiate so as to give you ample time to get your inspections completed, obtain the results and negotiate repair credits. When a Buyer is sloppy with the inspection date, he/she risks losing the protection of that contingency.
If the property is part of a Planned Community (i.e. Homeowner Association, Condominium, etc.) the Seller, at the Seller’s expense, must request a Certificate of Resale, and copies of all relevant documents, within a particular number of days after the date of the Agreement of Sale (usually around fifteen (15) days). The Seller must promptly deliver all of the documents to the Buyer. Pennsylvania law requires that the Homeowner Association must provide these documents within ten (10) days of Seller’s request. Pennsylvania law also provides that the Buyer may declare the Agreement of Sale null and void at any time before he/she receives the Homeowner Association documents from the Seller, and within five (5) days after receipt, or until settlement, whichever shall first occur. As a result, it is extremely important that the Seller complies with these deadline dates or else the Buyer will have the ability to terminate the Agreement of Sale and receive a refund of their deposit.
Pay close attention to negotiating the above dates and then make sure you place all the dates in your calendar after the Agreement of Sale is fully negotiated and executed. Contact OWM Law to help you negotiate the Agreement of Sale and then comply with all of the deadline dates subsequent thereto.
— Written by David A. Megay, Esq.
DISCLAIMER: The contents of this blog are not legal advice, and are not to be used for that purpose. If you are faced with a legal matter, you should contact a lawyer immediately in order to ensure that you are protected.