Timing is crucial to the success of a real estate transaction. I use the word “timing” to refer to basic components of a transaction, like finding an available property that fits your needs, making an offer before someone beats you to the punch, getting financing when rates are favorable, and putting your home on the market at the best possible time. Factors like these can all play into your success or failure.
But it’s not just about those issues … when it comes to the timing of dates on a purchase contract, knowing what has to happen by when puts everyone on the same page and ensures the transaction will flow as smoothly as possible.
It all starts with the effective date
Most dates and deadlines on the contract are based on the effective date. As the contract promulgated by the Texas Real Estate Commission notes, the effective date is the date of final acceptance. This is the date when the contract becomes binding. To consider a contract binding, four conditions must be met:
The contract must be in writing.
The buyer and seller must sign the final contract, including initialing any handwritten
changes to the initially drafted offer.
Acceptance must be unequivocal.
The last party to accept must communicate acceptance back to the other party
(or the other party's agent).
If the first three elements from the list have been satisfied, the effective date is considered to be when this last step – communication back to the other party – occurs. Either the seller's broker or the buyer's broker should fill in this important date. It sounds like an easy determination but can get a bit murky when counteroffers are being faxed back and forth and agents are leaving messages for clients and each other on answering machines and through e-mails. Because of the potential confusion, it's a good idea for both brokers to confirm the effective date when the final acceptance occurs.
With the effective date filled in, many time periods and deadlines in the contract are now set, but it takes a bit of figuring to determine them. Rather than a specific calendar date, several paragraphs have wording like, "Within __ days after the effective date of this contract, seller shall..."
One key provision in many contracts, the option fee, is one such condition. The option fee is a sum paid by the buyer in exchange for the right to terminate the contract for any reason within a specified amount of days after the effective date. Most buyers schedule inspections during this period so they can determine if they want to proceed with the purchase.
The paragraph that contains the option fee states "Time is of the essence for this paragraph and strict compliance with the time for performance is required." In plain language, that means the option period has a strict deadline that must be met if a buyer plans to terminate the transaction..
So how do you figure out the precise number of days for that type of deadline? First, make sure you're counting calendar days, not business days. When considering a time period that is "within" a specified number of days after the effective date, start counting on the day after the effective date. So, if the effective date on a contract is July 15, and a time period of some provision of the contract states "within 10 days after the effective date," the time period ends at 11:59 p.m. on July 25.
Get some good advice
Your Texas REALTOR® can discuss various timing issues involved in a contract and any related addenda. Once you know what the different deadlines require and which ones might have a little leeway and those that don't, you can be sure to meet all your time-sensitive obligations and achieve your goal of buying or selling a home.
For more information about buying or selling real estate in the Lone Star State, I encourage you to visit TexasRealEstate.com. For your real estate needs, please contact RE/MAX Genesis at 830-833-2000.