Missing a timeline in a Real Estate contract can cost buyers and sellers real money, so it is critical to know and understand when those deadlines are, what they are for, and what the consequences of missing a date and/or time could mean.
Earnest Money and Option Money are two of the very first items with dates that are CRITICAL. Both must be delivered to the Title Company within three days of the Effective Date of the Contract. So, your first question should be What is the effective date of the contract? That is that date that all parties agreed and signed a final draft of the contract. In the TREC 1-4 Family Residential Re-Sale Contract that date is currently shown on page 9 of 11 and is titled EXECUTED. So yes, to answer your next question, Effective Date and Executed Date are typically the same thing.
FAILURE TO TIMELY DELIVER EARNEST MONEY: Buyers, if you don’t get Earnest Money deposited in time you can be in Default and the Seller can Terminate the Contract, which means you just lost out on your dream house. Or if you changed your mind and don’t want the house and thought not depositing the Earnest Money would negate the contract, think again. The contract has a whole paragraph dedicated to legal remedies in the event either party defaults. One of the remedies a seller could use would be to enforce ‘Specific Performance’: I know, I know…. What is Specific Performance? Wikipedia defines it as an equitable remedy in the law of contract, whereby a court issues an order requiring a party to perform a specific act, such as to complete performance of the contract. In layman’s terms, the seller could possibly sue you and force you to buy the house.
Failure to timely deliver the option money means you just lost your unrestricted right to terminate, even if inspections reveal the roof is bad and the foundation is so bad the house is about to slide down the hill, you are, at best, going to lose your earnest money when you try to terminate. At worst, you could be facing Specific Performance. Yes, this is a bit of an exaggeration; but it does happen, and I don’t want it to happen to you.
The date and time to exercise your right to terminate under the option clause is hugely important. The date is whatever was agreed to in the contract, but the time dictated in the current TREC 1-4 Re-Sale Contract is 5 p.m. So, if you are trying to negotiate repairs at 4:50 p.m. on the last day of your option and haven’t reached an agreement, you should consider sending in SIGNED Termination paperwork at or BEFORE 5 p.m. I don’t mean 5:15 p.m., I don’t even mean 5:05 p.m. Otherwise you have lost your right terminate and you may have to pay for that new AC System out of your own pocket.
In closing I want to say loud and clear, “I am not an Attorney and the information in this article is not intended to be used as legal advice”. My intent is solely to make buyers and sellers aware of the importance of the deadlines in a Residential Sales Contract and of the importance of working with a REALTOR® who understands these timelines and is there to help keep you on schedule. As always thanks so much for reading our articles, if you have questions or comments, we would love to hear from you. Give us a call at 817-219-0456 or visit us online at www.WeSellGranbury.com.
pamK@knieperteam.com | 817-219-0456