Real Estate: 'Time is of the essence' of contract

"TIME IS OF THE ESSENCE. Time is of the essence of the 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. In such event, all Deposit(s) shall be disbursed in accordance with Paragraph 19 of the Contract"

In short, this important paragraph says that "done by" dates have real meaning. To further reinforce this concept, paragraph 53 of the contract goes on to define the "Computation of Days." That part of the contract is there to eliminate any misunderstanding of when the "clock starts ticking" or when you must complete the tasks agreed to by both buyer and seller.

A Residential Contract of Sale is chock full of dates and times by which "things" must be completed. The timeline is all directed toward getting to the settlement table, while allowing the buyer to complete "contractual contingencies" outlined in the contract. As a result, most of these "due dates" are defined by the buyer. For the buyer, the deadlines include things like, completing a home inspection (that can include the whole gamut of issues, from a general inspection to looking at specific issues such as a well, septic system or environmental conditions that might concern the buyer). All of these inspections are to be ratified in the original contract. If the buyer wants to go "fishing" for something more, the seller has no obligation to allow for additional inspections. The seller has the right to "disallow" any inspections that aren't set forth in the original contract.

Beyond home inspection contingencies, the buyer usually has a set date by which they must make loan application as well as get loan approval. In today's world, loan approval is an important part of getting a house to settlement. Back in 2005, loan approval didn't mean much more than the ability to sign your name and make some vague representation of your income. Today, you actually need to verify how much you make and show that you are qualified.

Consequently, a seller should take a hard look at the "loan approval" part of a buyer's contingency in a contract. Also, what constitutes "loan approval" is up for grabs. As a seller, you might get a letter that says your buyer is "pre-approved." But, that lender letter often goes on to say that such approval is "conditional" on verification of income and a whole host of other issues. So, as a seller, make sure you know the difference between "pre-qualification," "pre-approval" and the stamp of approval that says, "the bank is committed to make the loan."

In our discussion of "time," there's another consideration regarding a real estate transaction. That involves the relationship between you and your Real Estate Agent. In today's 24/7 world, there has become an expectation for an immediate response. The average time to sell a house is about five months, but we've recently seen a timeline in which buyers and sellers measure that in hours, sometimes even in minutes. With the sour economy and people being shoved up against a "do or die" scenario, we understand the "immediate" concern many have for the sale of their home. The same applies for those seeking a place to live. Nevertheless, we wouldn't expect a response from our Lawyer, unless we were in handcuffs, or an immediate call back from the doctor, unless there was blood on the floor. Maybe it's because lawyers and doctors get paid by the hour; whereas, real estate agents get paid by the job.

Especially these days, you can be absolutely sure that your agent is doing everything they can to get your place sold, or find you a place to live. They won't make a nickel unless you buy or sell something. In the end, try to recognize that your agent is on your side and know that they aren't sitting around waiting for the phone to ring. Just like you, they're looking for a buyer or seller. Their payday won't come unless a house gets sold.

E-mail and your Blackberry, are both sin and savior. On one hand, an agent could sit at the beach and do a deal. On the other hand, they're never disconnected from the demands of a client. In the end, the most valuable commodity any of us have is time.

Days above dirt often define success. We realize that selling the single biggest investment in your life is obviously important, but also recognize that getting your house sold probably doesn't hinge on calling your agent at 8 p.m. Sunday night. As we said, would you expect to reach your lawyer, doctor or stock broker at such an hour, unless it was an absolute emergency? Why bring your real estate agent to a higher level of inconvenience, over something that can obviously wait until normal business hours on Monday. Days back, Maryland had the Blue Laws that prohibited business on Sunday. Previously, we thought this was an unwarranted intrusion on free enterprise. Today, we're having second thoughts. Everyone needs a day of rest, especially those who work on 100 percent commission.

Tip of the Week

When you establish a relationship with a real estate agent, determine, up front, the best way to communicate. Beyond anything else, we've found that clients are most concerned when they feel they're out of the loop. That doesn't mean you need to be hooked at the hip with a daily comforting call, but agents need to let their clients know what's going on. As a result, a regular form of communication can go a long way in keeping everyone happy.

For sellers, we have an automated method of providing e-mail feedback on any showings. For buyers, we deliver an update on any new listings that might be of interest. At times, we give all of them a call just to say "Hi."

Unlike our previous market, much time can go by when nothing takes place. Touching base is important during such periods.

We've found that e-mail is frequently the preferred means of correspondence. It provides a large amount of information while allowing clients to respond at their own convenience. Regardless, it's important to talk with your agent about how the communication flow will work. Let them know your expectations. A good agent will always accommodate the communication that's comfortable for you.

Bob and Donna McWilliams are practicing real estate agents with more than 20 years of combined experience in the Annapolis area. Their Web site is www.BobDonna.com, and you can e-mail them at McWilliams@BobDonna.com.