Deadlines are important in a real estate transaction and could involve a number of scenarios such as determining binding acceptance or rejection occurring, contingencies ending and closings happening. Deadlines are everywhere in real estate, and it’s your responsibility as an agent in the transaction to help keep track of dates and deadlines for your consumers.
You should always be aware of the contract dates and deadlines involved in the transaction. Always. While your consumer may have a general idea that the inspection contingency is ending “this evening,” for instance, they don’t typically know when calculating a deadline the day the event occurred, such as acceptance, is excluded. Therefore they may believe the deadline is today, but it’s actually tomorrow. You’re their trusted advisor; they rely on your expertise to help them navigate through the transaction. Inform your sellers and buyers of the dates and deadlines that have an impact on the transaction.
Scenario
An accepted offer includes the following language: “A pre-approval letter must be provided by Buyer to Seller within 7 days of acceptance. If Buyer does not make timely delivery of said pre-approval letter; Seller may terminate this Offer if Seller delivers a written notice of termination to Buyer within 3 days of the deadline.”
This language may have a huge impact for your seller. This accepted offer does not include a bump clause. While you informed the seller of the consequences of accepting an offer without a bump clause at the time of the seller accepting this primary offer, the seller accepted it anyway.
The seller just received a secondary offer for a cash purchase above listing price with an inspection contingency. The seller LOVES this secondary offer and wants to make it primary. However, without a bump clause, the seller’s ability to make this secondary offer primary is very limited. But you’re an agent who is aware of the deadlines, and you know the primary buyer’s deadline for providing the pre-approval letter was last night at midnight. Therefore, your seller now has a three-day window to terminate the primary offer because the buyer did not timely provide the pre-approval letter.
When you discuss this opportunity with the seller, the seller directs you to draft a notice terminating the offer based on the contract language. You send the WB-41 Notice Relating to Offer to Purchase (WB-41) to the buyer, which is signed by the seller and references the termination of the offer based on the buyer’s failure to provide the pre-approval letter. You also send the primary buyer a WB-45 Cancellation Agreement and Mutual Release (WB-45), also signed by the seller. The primary buyer also signs the WB-45. Finally, you send a WB-41 to the secondary buyer. The WB-41 informs the secondary buyer they are elevated as the primary buyer. And this makes for a happy seller.
Because you were aware the buyer’s time frame for providing the pre-approval letter had ended and took action, you afforded your seller the ability to move forward with a better offer than what the seller could have potentially been stuck with. While your work as the listing agent is nowhere near complete, you should be feeling confident that your understanding and tracking of the contract dates and deadlines assisted your client to be in the best position from the client’s perspective.
Reminders and drafting tips
Deadlines definition
Understanding how to calculate deadlines is an important part of practice; see the definition of deadlines insert from the offer to purchase below. This definition reminds you of the location in the offer of how the parties, their agents and their attorneys calculate dates and deadlines.
Yes, there are conditions such as whether days, business days or hours are used for calculating time frames and deadlines. All of these conditions are negotiable. For instance, if the seller wants to say, “I want all days to end at 10:00 p.m. CST,” they can attempt to negotiate for that change. However, if no changes are made, then the default definition on lines 174-181 of the WB-11 Residential Offer to Purchase will apply.
Time is of the essence
Additionally, the “time is of the essence” provision is another important piece of the offer to be mindful of when discussing deadlines. Located on lines 318-324 of the WB-11 Residential Offer to Purchase, the parties may negotiate that “time is of the essence” applies to some or all dates and deadlines. Again, if the parties do not negotiate to exempt some specific dates and deadlines from the application of this provision, then the offer defaults that time is of the essence to all dates and deadlines.
Don't leave dates and deadlines blank!
When drafting an offer to purchase, agents should ensure they are including all necessary dates and deadlines. If a contingency does not include a deadline time frame, then the court will typically set a reasonable time frame.
A party could attempt to argue that because all material terms were not specified, there was no meeting of the minds, and therefore the contract is not enforceable. If an accepted offer includes a blank line in an applicable contingency, then the parties may agree to amend the offer to agree on a time frame. Neither the parties nor the licensees can unilaterally add conditions to the contingency missing in the offer. For example, if a blank line occurs in the bump clause, the listing broker cannot say, “typically we see 72 hours in this contingency, so that’s what the seller has decided the buyer gets once the seller has given them notice of being bumped.” If the offer does not include a term, a party or the licensee cannot make one up.
Hopefully, the parties can resolve the missing deadline time frame via amendment. However, if the parties are unable to reach an agreement, they should consult with legal counsel.
Leave the legal advice to the attorneys
When a party has missed a date or deadline and time is of the essence, lines 322-323 of the WB-11 state that the failure to perform by that specific date or deadline is a breach of contract. So when a buyer fails to meet a specific date or deadline and your sellers asks, “what are my options?” you can provide a basic explanation of the offer language. This explanation is best provided while showing the seller the actual language in the offer. Therefore you would show them the “time is of the essence” section and point out since time is of the essence, it would appear that lines 322-323 apply. When your seller then asks, “okay, then where can I go from here?” you could show them the default section of the offer on lines 278-292. (See box below.)
When you show the seller the default section of the offer, do not advise them on what action they should take. If the seller takes the position the buyer is in default, then the seller may direct you to draft and deliver to the buyer a notice to terminate the offer that specifies the buyer’s default along with a WB-45. Without a fully executed WB-45, the parties may retain rights and obligations under the contract. If the seller cannot decide what action to take based on their review of the default language in the offer, they should consult legal counsel as to their legal rights and the process moving forward. For more information on the importance of referring consumers to legal counsel, see Tracy Rucka’s article, "The Best of the Legal Hotline: CYA — Call Your Attorney" online at www.wra.org/WREM/May15/Hotline.
When drafting the offer, remember to review it one more time to ensure it reflects the intent of the parties and includes deadlines and dates. Just remember you want to be known as an agent who is known for tracking and understanding the dates and deadlines.
Cori Lamont is Director of Corporate and Regulatory Affairs for the WRA.