April 9th, 2015 7:02 AM by Jackie A. Graves, President
We signed a contract to sell our house, and gave the buyers certain time
limits. From the date of "contract ratification" they had 7 business
days to have the house inspected, and 30 days in which to obtain financing.
what constitutes "ratification"? A REALTOR® friend told us that a
contract is ratified when all parties sign off on the contract document, but a
lawyer friend said it starts when all contingencies have been removed.
Depending on the language in your real estate sales contract, it is possible
that both of your friends have given you good advice.
look at how a contract is formed. The potential buyer likes your house and
submits a written offer to you. This is often done through any real estate agents
involved in the transaction.
a seller receives an offer, he has three options:
it as it was written;
the offer completely, or
It should be pointed out that this does not always relate to the price of the
house; for example, the offer may propose that settlement will take place in
three months, while the seller wants it to occur earlier (or later).
there is a counteroffer, the process starts all over again. The recipient of
the counter has the same three options.
the parties reach agreement on all issues, some people would take the position
that there is a ratified contract. But others would argue: "wait a minute,
since the buyer can get out of the contract because of the various
contingencies, the contract is really not final (i.e. ratified) until all those
contingencies have been removed and the buyer and seller must go to settlement.
the Washington metropolitan area, this problem is solved if you use the
Regional Sales Contract. Paragraph 28, entitled "Definitions",
specifically states that the "Date of Ratification means the date of final
acceptance in writing of all the terms of this Contract (not the date of
expiration of removal of any contingencies".
the bottom of the last page of the contract, there is a line for filling in
this ratification date. Since so many conditions depend on this date, every
real estate sales contract must identify this in clear terms.
the other hand, if you are not using the Regional Sales contract, your lawyer
may actually be correct. Your buyer has a contingency for a home inspection as
well as for obtaining mortgage financing. In law, these are referred to as
"conditions subsequent". There is a sales contract but it can be
declared void if certain conditions do not pan out. If the inspection report is
unsatisfactory to your potential buyer, he may be able to get out from under
the contract and get a refund of his good faith deposit. In fact, many buyers
will not allow the deposit to be cashed until after the home has been inspected.
if the contract can be voided after it has been signed by all parties, many
people take the position that the contract is not fully ratified until all
contingencies have been satisfied and removed.
is determing the ratification date so important?
a typical real estate transaction, the sellers are relying on the buyer going
to settlement within the time spelled out in the contract. The sellers need the
money in which to purchase their next house. If they cannot meet their
deadlines, they may be in default on their purchase contract and could forfeit
sellers will often include the following language in the contract:
IS OF THE ESSENCE
generally means that if you agree to settle on July 20h, unless that day is a
holiday or a weekend, settlement must take place on that date.
also means that all time limits are carved in stone -- unless the parties
mutually agree to any extensions. If the home inspection contingency says 7
business days, if the buyer does not act within that time frame, he cannot use
the home inspectors report as a means of getting out from under the sales
are many time-related issues involved in a real estate contract, such as:
review of condominium documents;
sale of purchasers home first;
date of settlement;
obtaining a gift letter or a
pre-qualification letter from a lender
you are a buyer or a seller, you must understand these time constraints. I
generally recommend that both parties prepare and agree on a calendar of events
relating to the sales contract. If both buyer and seller are on the same page
regarding these time deadlines, there should be less confusion as the parties
move toward settlement.
by Benny L. Kass | To view the original article click here