A User’s Guide to Meeting the 14 Deadlines in the Agreement of Sale
When a property goes under agreement, Buyers and Sellers typically breathe a collective sigh of relief. Real estate agents on the other hand know that the true work is just beginning.
If a standard PAR (Pennsylvania Association of REALTORS®) agreement of sale is used in a transaction, there are 14 deadlines that must be met in order for the parties to be in compliance with the terms of the agreement. Missing any one of these deadlines can have dire consequences to the party that fails to live up to their end of the bargain.
- Producing the Earnest Money Deposit – The initial deposit must be in Broker’s possession within five days of the agreement’s execution date, provided an alternate time frame is not agreed upon. The Seller may the terminate agreement if the Buyer does not produce a check in this time frame. The Broker is then responsible for depositing the money in an escrow account by the end of the next business day following receipt.
- Meeting the Settlement Date – Both parties agree to a settlement date within the contract and it may only be extended by mutual written agreement between the Buyer and Seller. If all other contingencies have been met by the Buyer and Seller (i.e. mortgage, inspections, title, etc.) and either one of the parties fails to settle, the aggrieved party may pursue remedies available to them within the contract.
- Written Acceptance of the Offer – The Buyer and Seller are only bound by real estate agreements that are in writing so oral statements claiming acceptance of an offer carry no weight. The Seller should keep in mind that even though the agreement gives the Seller a deadline date to respond to the offer, the Buyer can withdraw an offer at any time prior to acceptance.
- Mortgage Commitment Deadline – The Buyer is obligated to deliver a copy of their mortgage commitment to the Seller upon receipt. If the Buyer misses the mortgage commitment date, only the Seller has the option to terminate the agreement. Keep in mind that mortgage commitments may not be conditioned upon receiving a satisfactory appraisal, so the Buyer’s lender should never wait to order the appraisal.
- Locking an Interest Rate – The Buyer can state in the agreement of sale that they will only accept an interest rate offered by the lender if it is below a certain number. However, the Buyer is bound by the terms in the agreement of sale if they were given the opportunity to lock in their interest rate during the course of the contract but chose not to lock in their rate and the rate is now higher than the terms stated in the Mortgage Contingency.
- Applying for a Mortgage – The Buyer is responsible to make a mortgage application within seven days of an executed contract unless another time frame is agreed upon. Getting a ‘pre-approval’ or being ‘pre-qualified’ does not fulfill this requirement. If the Buyer does not apply for a loan and pay an application fee to the lender within this time frame, the seller may declare that the Buyer is in default.
- Making Lender Required Repairs – If the Buyer’s lender requires repairs as a condition to obtaining a mortgage, the Buyer must immediately notify Seller in writing of this requirement. The Seller has five days to respond to request in writing. If the Seller does not respond or refuses to make repairs, Buyer has five days to accept or reject Seller’s decision in writing. If the Buyer fails to respond, they must proceed with sale.
- Conducting Inspections – The Buyer must have any requested inspections completed within ten days of execution date of agreement unless another time frame is agreed upon. Buyer must respond to Seller in writing during contingency period whether they will accept, reject, or request corrective action. If corrective action is requested, Seller has five days to respond in writing if they will accept, reject, or negotiate corrective action(s). If no acceptable resolution is arrived at, Buyer must respond in writing how they will proceed within two days. If the Buyer does not provide a written response following the negotiation period, Buyer is deemed to have accepted property. (NOTE: Time frames for negotiating septic concerns are different.)
- Notification of Public/Private Assessments – If an assessment is received by Seller after agreement has been signed, they must notify Buyer in writing within five days. The notification must state whether Seller will comply with assessment or not. If the Seller chooses not to comply, Buyer must respond in writing within two days of their intent to proceed with the sale.
- Meeting Municipal Requirements – If the Seller receives notification from the municipality where the property is located that there are uncorrected defects in/on property, they must notify Buyer in writing within five days of their intent to correct the deficiencies. If the Seller chooses not to correct the deficiencies, the Buyer must respond in writing within five days of their intent to proceed with the sale.
- Obtaining a Resale Certificate – If the property that is being purchased is part of a homeowner’s association, the Seller must request a resale certificate from the association within fifteen days of execution of agreement. The association has ten days to fulfill request or they are in violation of the Uniform Planned Community Act. The Buyer has five days to examine the certificate and proceed with the sale or terminate in writing.
- Clearing Up Title Issues – The Seller must be able to convey good and marketable title to the Buyer. If the Seller cannot convey good and marketable title, the Buyer may terminate the contract anytime prior to settlement and receive their earnest money deposit back in addition to any costs that were incurred for inspections and/or certifications.
- Damage to the Property While Prior to Settlement – If any part of the property is damaged prior to settlement, the Seller needs to notify the Buyer in writing of their intent to repair the item(s). If the Seller chooses not to repair, the Buyer has five days from notice to respond in writing of their intent to proceed with the sale. The Buyer is deemed to accept the property if no notification is produced.
- Communications Between the Parties – The Buyer must promptly deliver the Loan Estimate and Closing Disclosure to Agent for Buyer when they are received. In virtually all cases, delivering documents to the Agent for Buyer or Seller constitutes notice to their respective clients. Failure on either party to communicate in a timely manner with all parties may constitute default.
How is a Buyer or Seller expected to keep track of all these deadlines? One little misstep could have serious consequences.
That’s where a professional real estate agent enters the picture. They are trained to navigate the murky waters of a real estate transaction and provide valuable guidance so that their clients don’t unknowingly violate portions of an agreement. Be smart. Use a REALTOR®.
All the best!