The Ultimate Ultimatum in the World of Real Estate
If you read a purchase agreement carefully, you will find multiple paragraphs that state the buyer and seller are contractually obligated to act within certain time-frames. Not meeting those obligations in a timely manner can create what we call a domino effect, multiple buyers and sellers depending on others' transactions to successfully close so theirs can too.
Enter, the ultimate and sometimes necessary ultimatum in the world of real estate. There are two common documents available to real estate agents in California in order to deal with the situation, depending on which party is behaving badly delaying a sale.
Notice to Buyer to Perform: As the name suggests, this is the tool to use when the buyer is unable, for whatever reason, to perform their obligations within a specified amount of time. Here are some of the more common reasons.
- Buyer's obligation to remove their loan contingency. When the buyer fails to remove their loan contingency on time, they haven't yet obtained final loan approval from the underwriter. This could be due to their financial situation, or perhaps an appraisal coming in below the contract price.
- Sale of Buyer's property. This is yet another contingency to be removed, but not as common. Sometimes the buyer needs to sell a property in order to purchase a new one, usually because their current property has an existing loan that needs to be paid off.
- Delivery of Initial or Increased Deposit. Deposits are necessary for an escrow office to do his or her job. Without the earnest money deposit, the escrow can't move forward, causing a delay in the transaction.
Notice to Seller to Perform: Now it's the seller's turn. Let's see how the seller might be causing delays.
- Identification and/or Close of escrow of seller's replacement property. Just like the buyer might need to sell a property in order to purchase a new one, the seller might need to find a replacement property to purchase.
- Delivery of seller disclosures. The seller is normally obligated to provide disclosures to the buyer, mostly consisting of material facts affecting the property. Certain sellers are exempt to a point, specifically those who have no knowledge of the property such as a bank selling after a foreclosure or an executor selling via probate.
- Repairs. Repairs are not normally an initial term of the purchase contract, yet the buyer might request the seller make repairs when a home or pest inspection reveals physical defects. If the seller agrees to the request for repair, the repairs must commonly be done before close of escrow, creating a time line of its own.
The Ultimatum: The ultimatum is, the seller or buyer MAY cancel the purchase contract if the other party does not perform their contractual obligation within X number of days. It's a threat, loud and clear. Do we, as agents, like to pull out either of these two loaded guns? No, we don't. But sometimes they are necessary, they wouldn't exist otherwise.
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