We live our days by the calendar in the world of real estate. We don’t recognize business hours when it comes to contractual time-lines, but we do recognize them when it comes to co-mingling the schedules of our clients with our own lives.
In the world of real estate, time is of the essence, and deadlines need to be recognized based on calendar days. There is one exception that allows us to deviate from the calendar day, and that’s on line 18 of the Purchase Contract which states that: “If Escrow Company or recorder’s office is closed on COE date, COE shall occur on the next day that both are open for business.”
When we measure time deadlines, there’s a starting point and an ending point. The starting point is always 12:00AM of the calendar day following the day that the agreement to proceed down that particular timeline was mutually agreed upon and the end time is always 11:59:59 PM of the last day of the timeframe defined. However, prior to there being an executory contract (that means that the contract has been signed by all parties and everyone agrees upon the terms), the beginning and ending period to the time constraints are specified by the buyer and seller.
For instance, in a purchase contract, the first time constraint is the time that the seller is given to respond to a new offer. The beginning time is the time that the offer was delivered to the seller’s agent, and the end time is the time that the buyer gives the seller on line 386 of the purchase contract. The seller must respond in writing by that time, whether it be an acceptance of the offer, or a counter offer with a new expiration time and date for the buyer. Negotiations on a contract that is not yet executory can go on for days, or it could resolve in the first attempt.
More importantly are the timelines that begin once both buyer and seller strike a deal. The first of these timelines is the inspection period which begins, unless otherwise defined, at 12:00AM on the morning after the buyer and seller agreed upon the deal. It then lasts for 10 days (unless otherwise written into the contract) and expires at 11:59:59 on the 10th day.
Timelines are important because they usually require some sort of action on the part of one of the parties to the contract. During the inspection period, the buyer has 10 days to do his or her research, inspect, etc., on the property. Prior to the end of the inspection period, the buyer can, if they opt to do so, deliver a Buyer’s Inspection Notice. That notice must be delivered to the other party before the expiration of the timeframe. If it’s not, there’s typically something that defines what happens. In this case, if the buyer fails to deliver notice, it’s considered the same as accepting the property with no corrections.
Some of the timelines can be redefined by actions. During the inspection period, if the buyer delivers notice to the seller on day 7, then the 10-day inspection period effectively ends and a new time period begins — the time that the seller has to respond to the buyer, which is 5 days unless otherwise defined.
Another example of a deadline in the standard purchase contract for a buyer who is obtaining a loan is in section 2g lines 72-73. This section states that “Buyer shall sign all loan documents no later than three (3) days prior to the COE date.” Obviously if the buyer needs to sign 3 days prior, it means that the lender would have to have documents to the title company for document preparation at least 3 days prior to close of escrow as well. This is handled in in section 2b, lines 55-58 which define that the lender must have docs in to the title company with NO conditions no later than 3 days prior to close of escrow.
To be honest, this one is often missed by lenders and buyers due to the lender moving slowly.
How do we handle a missed deadline?
Quite frankly, most buyers and sellers are willing to bend when it comes to stringent timelines. But sometimes a seller or buyer will stick to their guns and work strictly on the letter of the law. Assuming the client is diligent about sticking to the timelines, what would happen? The potential breaching party would receive a cure notice from the other party.
Let’s say for gits and shiggles, that the lender failed to deliver documents to the title company 3 days prior to close of escrow and that day was supposed to be on a Tuesday, for example. The seller, at Midnight on Wednesday could issue a cure period notice to the buyer letting them know that they have a potential breach of contract that needs to be cured like a disease needs to be cured. Since all timelines begin at Midnight following the event ( in this case, issuance of a cure notice,) the buyer would have 3 days beginning on Thursday at Midnight and ending on Saturday night at 11:59:59PM.
Cure period notices aren’t fun to work through, as it can convey that someone is unwilling to work towards a resolution without incident and it can throw people off, and sometimes offend them. There’s an entire section (section 7) of the purchase contract that focuses on remedies for non-performance, and non-performance is usually tied to a missed deadline.
That is why timelines are so important in a real estate transaction. Missing a deadline could be very costly if one or more parties are unwilling to work out turbulence throughout the transaction without filing the supporting paperwork. At the same time, filing the paperwork is important in order to recognize in writing the events that occur.
If you enter into a contract to buy or sell a home, make sure you pay attention to the various timelines incorporated into the contract and do your best to meet those deadlines.