Time is of the essence in real estate

BY JAY BRIJPAUL

An offer is an agreement to purchase a property under specific conditions. This agreement is time sensitive and has certain deadlines.

The first deadline is the irrevocability clause. What that means is that the person presenting the offer cannot revoke it until after a given time. I recall an incident in which the seller gave the buyer an offer with a certain deadline to accept and then decided not to sell. The buyer accepted the offer within the timespan and the seller could not revoke their offer. It is important to make the timeframe for acceptance as short as possible. If the offer is not accepted within the given period, the offer becomes void.

One of the requirements in an offer is the amount of money a buyer needs to deposit. This money is held in a trust account until the closing date. The closing date is when the buyer gives the seller the remainder of the money for the property and obtains the keys. The initial deposit can be made when an offer is accepted. The buyer has a window of 24 hours to arrange for the deposit. If the deposit is not made, the agreement can be voided. Many buyers have their funds locked into RRSP or mutual funds. In such cases, the sales agreement must have a provision saying that the buyer will make a further deposit by a certain date.

Most offers are subject to financing and an inspection being done within a given time, in most cases, within five business days from the acceptance of the offer. If it’s not done within the allotted time, the offer becomes invalid. I remember an occasion in which my clients fell in love with a home. However, this home was already sold conditionally to another buyer but was subject to the buyer obtaining financing by midnight of the following day. I submitted an offer to the seller on the condition that the previous offer does not finalize. It was 1 minute after midnight when the previous buyer informed the seller. The previous offer was no longer valid, and my buyers got the property. Once the condition such as obtaining financing or inspection is achieved, a written notice of fulfillment is required. This notice must be signed by the buyers and sent to the seller’s realtor prior to the expiry date. The seller must sign an acknowledgement that they received it.

Every property has a history. The history will contain information of all the previous owners and whether the sellers have the legal right to sell the property. It should contain other information such as mortgages or claims held against the property. Usually the buyer’s lawyer has a time frame to research the title. This is known as “the due diligence period” and the deadline is called the requisition date. Within that time, the buyer’s solicitor must send a list of things to be addressed. If it is not done before the requisition date, then those defects go with the property. To register a mortgage on a property, the lender requires a “clean title” and if the title has defects, the lender can refuse to finance the property. This is serious because the buyer may not be able to finalize the transaction and can be sued by the seller. Requisition dates should be set about 2 weeks before the final date, but the buyer’s lawyer should conduct a search much earlier. If there is a problem on the title, the seller’s lawyer needs time to address it.

Finally, closing date. It’s the date when ownership and money changes hands. Many things must be done simultaneously. The lender must transfer the loaned amount to the lawyer’s trust account; insurance is arranged, and all conditions are met. This must be done when the registry is open. The registry is a government agency that registers the property in the new owner’s name. Time is critical. If the deal cannot finalize on time because of any delay by the buyer, then the buyer can suffer a significant financial blow. Sometimes many transactions are on the same thread. A seller who sold must have bought as well, and the domino effect is deadly.

When the novelist Nathaniel Hawthorne wrote “time flies over us but leaves its shadows behind” he was likely referring to real estate.