March 31, 2020



You’d think with house sales reaching almost six million in the United States over the last few years, the process of buying and selling a home would be commonplace. Perhaps. But real estate contract details are so numerous that they can prove tricky, triggering the well-known adage about best laid plans going awry.

From the moment your real estate attorneys go to work creating and reviewing the contract, you should make sure to understand what you’re signing. A contract is still a contract even in these difficult times— especially if you’re in the middle of a sale. Whether it’s during “normal” times or during our new normal: Ask the right questions. Fully understand your responsibilities. And know your deadlines during the various stages of the buy/sell process. Anything less could throw a monkey wrench into the sales process and delay—even worse, scuttle—your deal.

An important laundry list of real estate contract details

Many state realtor associations have developed a boilerplate contract that features a laundry list of details. These include:

      • The names of the parties, a description of the property and the purchase price
      • The rights and obligations of the parties
      • The condition of the property, including what personal property is and is not included in the sale (e.g., refrigerators, washing machines, smart TV’s, etc.)
      • The amount of the earnest money deposit
      • The proposed closing date
      • The terms under which the buyer can take possession of the property

While our attorney review systems—even closings—may be virtual during this pandemic crisis, the contract requirements will not change.

The big three: common real estate contract contingencies

Typically, real estate contracts include contingencies, actions the parties must perform and complete for the deal to close. Contingencies reduce risks for buyers and sellers and give either party a chance to legally back out of the purchase under certain circumstances that will make it difficult for them to complete the sale.

The three most common contingencies require buyers to initiate certain actions:

      • Home Inspection – allows buyers to “kick the tires” by hiring a licensed home inspector to evaluate and provide a full picture of the condition of the interior and exterior of the property and its systems and receive recommendations on repair.
      • Financing – gives buyers the time to apply for and be approved for a loan that will combine with their down payment to cover the home’s purchase price; not to be confused with a pre-approval letter which simply starts the mortgage application process, financing requires underwriting during which the lender thoroughly evaluates the buyer’s financial capability to buy the home and confirms that the property appraises at a value that squares with the needed loan amount
      • Clear Title – provides buyers with an official ownership history of the purchase property title and ensures it is clear of liens, disputes, or other issues.

During the pandemic, the practices around contingencies may require virtual rather than face-to-face handling. But the resolutions around each contingency remain the same. Following the home inspection, financing and appraisal contingency reports buyers and sellers may have to renegotiate terms. For example, following the home inspection, the buyers may request repairs that sellers refuse to make; the buyers’ loan application may be rejected following the underwriting evaluation; or in the case of the appraisal, the market value of the home may fall below the amount needed to support the buyer’s loan application. If the parties cannot compromise, they may legally walk away from the deal.

As for the title contingency, a title search can reveal unknown situations which make transfer of title to the buyer difficult—and sometimes irresolvable. Overall, according to Homelight, 11 percent of closing delays come from title issues. More startling, they may come as a surprise.

In a typical situation, the title company will review the title on the purchase property and resolve any issues. But there can be worst case scenarios. Say the title reveals that an easement falls on the property line right where a buyer wants to build a fence or put in a pool. Liens or debts can also cloud a title. The title contingency gives buyers a way out of the contract.

A buyer’s favorite

One additional contingency, the home sale contingency, is a favorite among buyers. This contingency allows buyers a specified period to find a buyer for their current home. If they can’t find a buyer within that time, they have the freedom to walk away from the sale.

Unfortunately for buyers, this contingency isn’t loved by sellers who risk taking their home off the market for little-to-no assurance that the buyer will ultimately be able to complete the purchase.

As a buyer, you can still choose to include it but recognize that it can weaken an offer, especially in a hot market.

Meet deadlines and don’t get cold feet

Contract contingencies and the outs they provide are one element to the contract. But buyers—and sellers—can’t simply get cold feet and bail. What’s more, buyers’ feet are held to the fire to meet all target dates. In addition to a timeframe for scheduling the home inspection (typically 14 days from contract signing), this includes deadlines such as:

      • The due date for earnest money – This is paid upfront at the time of the offer; earnest money serves as a good faith deposit and signals sellers that buyers will honor the contract and perform on deadline. The earnest money deposit is held in escrow, or kept in custody, by one of the real estate attorneys until the closing. At closing, the title is officially transferred from seller to buyer.
      • The due date for a mortgage commitmentThis is the date by which a buyer must produce a commitment from a lender to loan money for the purchase of the price. More substantial than a preapproval letter, the commitment typically is issued only after the buyers’ financials have been thoroughly vetted and an appraisal has come back at the right amount.

In worst case scenarios, failure to perform on the contract can result in breach which occasionally can turn into a battle over any earnest money deposit.  A seller may seek to retain the deposit to cover any damages, although likely will have to initiate a breach of contract claim to receive any money.   Both parties should seek to avoid this result.

Final walk-through surprises

It’s incumbent on sellers to leave their homes in the condition specified in the contract. Buyers verify the sellers’ compliance during the final walk-through. Truly the time when the rubber meets the road, this inspection is an important part of the sales process. It is also one of the most common causes of a delayed closing.

Anything from the home not being empty, to it being damaged from the move or dirty, to property that’s missing but specified in the contract (e.g., a seller promises to leave the washer and dryer but inadvertently takes it), to negotiated repairs left undone…these are among the things that can wreak havoc near the end of the sales process.

Not over till it’s over

In fact, sometimes even closings go awry and, believe it or not, many of them do. For example, the closing can’t go through unless a closing disclosure form is signed by the buyer. If this form is to be signed on time, the title company or mortgage lender must send the document to the buyer no later than three days before closing so that the buyers can review it thoroughly and understand what they’re signing. If your closing is scheduled for Friday, the buyer must have the CD in hand by Tuesday or you’ll have to reschedule the final paperwork.

As crazy as it sounds, sometimes the seller and buyer get their signals crossed about move-in day timing. Realtors have reported that they’ve had moving vans in the driveway and the buyers crying because the sellers have not yet moved out.

And among the worst of situations that can disrupt closing: buyer financing issues. Over a third of closing delays may put your sale at a stalemate. With the business shutdowns of the current pandemic, your buyers could lose their sole source of income abruptly and unexpectedly. Or, in more stable times, the buyers could simply go on a shopping spree to furnish their new home. Either of these scenarios could cause the lender to question the buyer’s ability to keep up with mortgage payments.


From offer to final signature, a home sale requires a million little details to come together without a hitch. By working with your agent and your real estate attorney you will not only come to understand the contract but also anticipate snags. Whether it’s during “normal” times or during our new normal, understanding the contract details will enable you to be proactive rather than reactive, expect the unexpected, over-communicate, and act quickly to address problems. There’s no better path to a no-glitch closing

At Phelan, Frantz, Ohlig & Weqbreit, LLC, we’ll help to provide the education, insight and perspective about your real estate contract and your transaction. Please call us at 908.232.2244 to learn how we can assist you to effectively, efficiently and successfully navigate from offer to closing.


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