Time is of the Essence
The Maryland Residential Contract of Sale clearly stipulates that Time is of the Essence. It is of such importance that it is not only on page 1 of the Sales Contract but at the very top, framed and all. But what does it mean?
"Time is of the essence of this Contract. The failure of Seller or Buyer to perform any act as provided in this Contract by a prescribed date or within a prescribed time period shall be a default under this Contract and the non-defaulting party, upon written notice to the defaulting party, may declare this Contract null and void and of no further legal force and effect."
Simply put, it means that all contingencies should be removed within the time periods agreed upon otherwise the Contract may 'fall through'. The most common contingencies are home inspection, appraisal, financing commitment and a clear title to the property.
The problem is that there can be delays that are out of our control. The appraisal may take longer than expected, or repairs and a reinspect may be necessary. Condo or HOA docs may not arrive in time, the condo fee delinquency rate may suddenly be too high, there may be a cloud on the title ...
Underwriting can be another big time sucker. It's incredibly frustrating for everyone involved when conditions are tacked onto the final review... 3 days before your scheduled closing date. Such conditions need to be satisfied before you get to hear the magic words Cleared to Close!
Underwriters are supposed to scrutinize the file, however, occasionally we'll end up with ridiculous requests to the tune of dig up your dog's bones so we can verify that you do not have to pay any vet bills (fiction) or getting a roof certification done because the appraiser noted a nail sticking out of the gutter (non-fiction).
Sometimes it's just a matter of clarifying something and submitting supporting documentation for the umpteenth time. Other times everyone scrambles to get whatever the request is, done. No matter how ridiculous it seems, it is what it is. You had better dig up your dog's bones or no loan.
Delays are not unusual in today's Real Estate World. A contract may be declared null and void by the other party, but it doesn't have to go there. It all boils down to communication and performance. Are listing and buyer's agent communicating? Are buyer's agent and lender communicating? Are loan officer and underwriter communicating? Is everybody doing what and when they promised to? Hopefully the answer is always yes.
Contingencies can be extended and as long as communication is good, updates are provided and the other side sees that you are working hard, chances are everyone will agree. However, it can become an issue when one person has gone AWOL.
Ideally, there are no issues to resolve and no bones to dig up. Ideally, everything can be done within the agreed upon time frames. Ideally, the title is clear, the appraiser turns it around quickly and your file does not go back to the bottom of the stack on the underwriter's desk. Yes, the ideal happens, too, and more often than not it is because Title Co., lender and Realtors® are working together like a well-oiled machine.
Time is of the Essence always but you should prepare for the worst (remember those bones) while hoping for the best!
*I am not a lawyer. No legal advice is given or implied. Seek legal counsel if you do not understand a provision of the Contract.*