Minding time periods of a purchase contract is an essential element of our Realtor duties. An expiration date of any of the given time periods can result in a Buyer losing their deposit or the Seller failing to close on their property.
Three important time periods to consider are:
- Loan Approval Period
- Inspection Period
- Condo Rider/ Condo Docs – 3-day rescission period
Loan Approval Period: The Loan Approval Period mentioned in Paragraph 8 (Financing) of the “AS IS” Residential Contract for Sale and Purchase is often overlooked and sometimes misinterpreted by Realtors. In its current revision (April 2017), the Buyer has two choices to make prior to the expiration of the Loan Approval Period if the Loan Approval has not been received:
- Waive Loan Approval, in which event this Contract will continue as if Loan Approval had been obtained
- Terminate this Contract
As previously stated, the above two choices are only made if the Loan Approval has not been received by the mortgage lender.
As an example: given a 30-day Loan Approval Period and reaching day 28 without a Loan Approval, I suggest the following:
- Make contact with the Loan Originator and discuss the ability to obtain the Loan Approval. If an Approval can be obtained by the next business day (day 29 of the time period), be sure to have it in the Seller’s Realtor’s hands by 5 pm on the 29th day of the time period.
- If the Loan Originator is not providing clear answers, not able to provide a Loan Approval, or simply stalling, please have your Buyer sign a Release and Cancellation of Contract and provide the ‘Release’ to the Seller’s Realtor.
Inspection Period: The Buyer should exercise their right to inspect and should do so as soon after the effective date as possible. Prompting a Buyer to setup an inspection within a day or two from the effective date of the purchase contract will keep the pressure off the process by providing adequate time for decisions. Should the Buyer not like the inspection results, they can exercise their right to cancel the contract within the Inspection Period.
If the Buyer does not like the inspection results and wants to ask the Seller to make concessions or repairs, the Buyer must do so during the Inspection Period. Any agreements made shall be executed during the Inspection Period as well. Once the Inspection Period expires, the Buyer has no further right to cancel for reasons stemming from the inspection.
Condo Rider/ Condo Docs: The Buyer has a legal right to be provided with and review a copy of the Condo Docs (if a Condominium Association exists). Condo Docs include the following with no exceptions: current copy of the declaration of condominium, articles of incorporation, bylaws and rules of the association, and a copy of the most recent year-end financial information and frequently asked questions and answers document.
The above documents shall be provided to the Buyer and the Buyer shall have 3 days to decide whether or not they wish to cancel the purchase contract. This is only applicable if Paragraph 5(b) is checked on page 2 of the Condominium Rider and, in my opinion, should always be the selected option. If you are representing a Seller of a condominium unit, please present a copy of the Condo Docs to the Buyer’s Realtor immediately after effective date to start the 3-day rescission period.