When selling your home, you will be governed by our Residential Purchase Contract.
Many sellers might see the boiler plate jargon and not pay close attention to some of the details within the contract. That being said, it’s very important to understand the timeframes that you have to abide by.
Understanding the timeframes for the purchase, and how they will affect you, before you go under contract, will help you better negotiate for your specific needs.
In this article, we’re going to discuss all of the timeframes that you MAY have to abide by, and those that you must abide by, once under contract.
For more information on those sections of the contract, see those articles separately.
Earnest Money
When the Earnest Money is to be deposited, is a little vague… It simply says, “Upon Acceptance”… which can be interpreted in many different ways, but is generally seen as “get it there soon”. If the contract is accepted late on a Friday, this may delay things, making it Monday (or Tuesday) before the buyer may submit those funds. This is important to clarify, if this is an important factor in your offer.
Closing Date
The primary timeframe that most people will look at is on page 1, and probably the most significant. it’s the Closing Date.
We put the closing date up front and center because it’s the most important. In Arizona, the closing date is simply the day that the deed is recorded by the county, NOT when the parties sign the documents or hand over funds.
A seller may sign their documents well before this date. A buyer will need to sign after their loan documents get to title, which may be as little as a day before the closing date.
All parties must agree to this date, but it is negotiable. There may be several factors to consider while negotiating this date. How long does the lender need to complete their part in the transaction? How quickly can an appraiser get out to the property? When is the soonest, or latest that the buyer CAN close and have funds in order? When is the seller able to arrange to be OUT of the house?
A typical closing date is about 30-45 days out for financed contracts, but can be as little as 7-10 days for a cash deal. This timeframe is going to GREATLY depend on your area, the other timeframes in the contract, as well as important aspects that are often not considered. Some unique situations may greatly affect your ability to close early or late, such as…
- The quality of the lender on the transaction. Online mortgage lenders or small banks often have hurdles that extend the timeframes. While others can do speedy closes that may rival cash closings.
- The day of close will adjust the buyers closing costs, which could affect their ability to close in a certain period of the month.
- The buyer may be dependent on a 1031 exchange, which could create an issue if the seller needed an extended close.
- Perhaps the seller is dependent on the close of a house their buying, creating a need to close before or even after a certain time.
These unique situations come up frequently, and a good agent will help you determine the right date. Also, keep in mind, holidays may affect your ability to close, so this date is important to look at, even if everyone is flexible.
“On or Before”
Some times, it can be tempting to “just put on or before, as the closing date”. Here’s the thing about using this verbiage. IT DOESN’T MATTER. If all parties are able and willing to close early, there is nothing preventing the buyer and seller to amend the contract to a new close date. Often times, a day or two early may not even need an official addendum (however, it’s always recommended).
Before you put “On or Before” on the contract, just remember, you will still need an addendum to change the date, so why create muddy, unclear terms?
Possession
In most cases, the day that Close of Escrow occurs, is the day that the buyer takes possession of the home. However, this section allows for a little flexibility, since the Close may occur at 9am, or 5pm… we never know. Section 1e could be used to negotiate a clear term for this action. For example, the buyers may want to ensure that they can move in at 9am, so you could negotiate this in. Or, the sellers may want to ensure that they can move out the day of Close, without worrying about timing… so perhaps the day after close is when they want the buyer to take possession.
This section is NOT for pre or post possessions to be negotiated. Your agent should have a separate set of forms to be used for that sort of timeframe, or even a possible lease to put in place for extended stays.
Financing Timeframes
The Loan Contingency
Section 2b of the contract states that the buyer has until 3 days prior to the Close of Escrow to get their loan in order for a successful close. These timeframes are defined as 3 full, 24 hour days, so it may seem like a longer span when counting it out on the calendar. For example, if the close of escrow is on Friday, the loan must have final approval by Monday, or else the buyer needs to send over a loan rejection letter.
Section 2e of the contract states that the buyer must provide a Loan Status Update (LSU) with no less than lines 1-40 completed, by day 10 of the contract. This timeframe is typically to ensure that the buyer has given the lender the go-ahead to proceed with the loan, showing that they do intend to move forward.
Section 2g gives the buyer 10 days FROM the buyer receiving the Loan Estimate, to give the lender the go ahead to proceed, so lines 32-35 of the LSU may not have an update if the buyer has not been on top of things.
Section 2l of the contract gives the buyer 5 days after they received the appraisal, to deny the property based on value not coming in at, at least the purchase price.
There are many aspects of lending that may affect the seller, and your agent should be looking out for your best interest during these times.
Title and Escrow Time Frames
Section 3c states that the buyer has 5 days after receipt, to review the title commitment, CC&R’s as well as any easements or restrictions to the property. (Remember, EVERY property has CC&R’s, this is not exclusive to HOA’s)
Disclosures
The most important timeframes for the seller fall within the Disclosure section of the contract.
Section 4a requires that the seller deliver to the buyer, the seller signed property disclosures. Keep in mind that deliver is NOT defined as ‘uploaded in the MLS’, so your agent still needs to email them to the buyers agent within this time period or else the next section may be effected.
The buyer has 5 days to review those disclosures and reject the property based on findings within. You can see why this is important to deliver to the buyer within those 3 days.
Section 4b speaks about the Claims history (NOT the CLUE). This is the insurance history on the property, usually simply stating that no claims have been filed during the time you’ve owned the property or 5 years, whichever is less. If there is a claim, the buyer may opt to cancel the contract, within 5 days of receipt. It’s important to order this immediately, so that the buyer gets it as quick as possible.
Section 4d states that the seller has 5 days to complete the Lead Based Paint Disclosure, if the property is built prior to 1978 (meaning on or before December 31st 1977). The buyer has a default of 10 days to investigate things for themselves and 5 days after those results (or after the 10 day period, which ever is sooner) to determine if they would like to cancel based on these findings.
Section 4e is in case the property is in an unincorporated area and an affidavit of disclosure is required. This is essentially like a public report for a new build, or essentially the sellers disclosure regarding the utilities and city services. If you don’t know if this is required, check with your agent. Just like the sellers disclosures, the buyer has 5 days to review.
Section 4f… if there are any changes to the condition of the property, frequently seen when there is storm damage, or a burst pipe… these new condition notifications will reignite the buyers 5 day period to review these updates.
You don’t want to delay the buyers ability to cancel outside of their due diligence period, so these things should be handled quickly.
Warranties
While not a negotiable timeframe, per say… the seller should be aware that they must convey the property without liens or or encumbrances by tradesmen completed within 150 days of the COE.
The seller is also on the hook for any material facts that they purposely withheld, long after the Close. Keep in mind that if you know that there is a sink hole in the yard, and you choose not to disclose this, the buyer may sue you, as long as they file within 180 days after they discover such issue was withheld.
Due Diligence
Possibly the most important section in the contract, and the most disputed timeframes, is the Due Diligence section. This is the section that describes the buyers responsibility to discover any material facts that affect their willingness to buy the home.
Section 6a discusses the time that the buyer has to complete this investigation. In most cases, the default of 10 days is used, however it is not uncommon for a buyer to propose a shorter period to be competitive, or even a longer period if there is a unique situation with the home.
A SELLER should NEVER insist on the buyer waiving their inspection, as this can come back to the seller in a bad way. Remember, the requirement to disclose survives the close date. However, if the buyer performs an inspection, some of the discovery responsibility is transferred to the buyer… so if the seller simply forgot that the kitchen faucet leaked under the sink 5 years ago, great, the inspection will cover them. If you don’t allow them to investigate, you do keep yourself safe.
The buyers due diligence period is described in section 6a, and the boiler plate timeframe is 10 days.
Once the buyer has done their inspections, whether that takes the entire 10 days or 2 days, they will submit a Buyers Inspection Notice to the Seller, known as a BINSR. The Seller, has 5 days from receipt to respond to that. If the seller accepts everything as written… the period ends. If they reject the buyers notice terms, or they respond to the buyer in part, the buyer has 5 days to accept or cancel.
In an ideal world, these timeframes will move smoothly and quickly. However, there is usually a bit of a battle during this timeframe as one party usually wants to demand that the other side respond quicker than what is stated in the contract.
Finally, as part of this section… if the seller does agree to any repairs, the repair receipts must be handed over within 3 days before Close of Escrow.
It’s important that if these times are critical, you work those details out before going under contract.
The last part of this section is in regards to the buyers walk through. There is no set timeframe, but keep in mind that the sell SHALL make the property available to the buyer with reasonable notice. This can be a can of worms, in my opinion… what’s “reasonable notice”. So, just be aware and accommodating and all should be well.
Remedies
If at any point during the contract, the other side has not lived up to their part of the contract… you must CURE the breaching party. There is NO automatic breach of contract. You must give the buyer a Cure Notice, giving them 3 days to resolve their issue. At the end of that period, you may opt to cancel and potentially retain the earnest funds for your trouble.
Acceptance (Not response)
The frequently misunderstood Acceptance time is the final timeframe to be concerned about. Most agents mistake this as a response time. It is not. This time is the expiration of the Buyer’s offer.
If the seller chooses to accept the offer, as stated, within the timeframe spelled out in the acceptance time, the buyer is tied to the contract. If that time expires, or the seller chooses to counter the offer… the buyer is not tied to it, and while agreement may still be reached, it’s up to the buyer to continue.
In conclusion….
Like everything in the contract, even boiler plate timeframes are negotiable, but you must write this into the contract or counter appropriately. Make sure that the agent you hire to represent you is discussing these terms with you and if you have objections to any of the timeframes, you address it up front. Once the contract is ratified, you have no choice but to wait these timeframes out.