The AAR Legal Line has recently seen an increase in calls voicing concerns that a licensee involved in a transaction has disregarded the deadlines listed in the Purchase Agreement. To be clear: regardless of the Purchase Agreement used, time is always of the essence. Below are three important deadlines that are seen in most Purchase Agreements. Always carefully read any Purchase Agreement used in a transaction to ensure that you understand – and can inform the consumer of – all deadlines.

This article is intended as information only and does not constitute legal advice. Consult your Qualifying Broker and/or an attorney for advice regarding Purchase Agreement negotiations.

Offer Expiration Date

Most offers to purchase include an expiration date, and some include a specific expiration time. While a buyer may choose to extend an offer’s expiration date or resubmit an offer later, if they choose not to do so, the original expiration date is binding. After that date (and time) has passed, the offer has expired. The seller may re-engage the buyer in negotiations, but the buyer is free to change any terms previously offered.

If you are working with a seller, it is your responsibility to help them understand the importance of responding to an offer or counteroffer prior to its expiration date. (And if you are working with a buyer who receives a counteroffer, you have the same responsibility to the buyer.) The AAR Purchase Agreements do not have a default expiration date, so you will need to write one in Paragraph 3.

Earnest Money Due Date

If Earnest Money is a component of an offer to purchase, a deadline to submit the Earnest Money should be included. Purchase Agreement terms vary, but often, if a buyer doesn’t submit Earnest Money by the due date, the seller has the option to terminate the Purchase Agreement. Even if the seller doesn’t have that option, a buyer failing to meet their first deadline is not confidence-inspiring for the seller.

If you are assisting a buyer in submitting an offer, it is important to help them understand them importance of timely submitting Earnest Money. The AAR Purchase Agreements have the options of Earnest Money being due on the Agreement Acceptance Date or within a certain number of days from the Agreement Acceptance Date.

Inspection Period(s)

Purchase Agreements vary widely in their terms regarding inspections. One thing that they have in common is that there is always a deadline by which inspections must be completed (although sometimes that deadline is as late as the closing date). If the buyer fails to have a property inspected by the inspection deadline, they forfeit their inspection contingency. In Alabama, which is a caveat emptor state, this means that the buyer would have to accept the property despite having very little information about the its condition.

Not only is it your responsibility to educate the buyer about caveat emptor, but also to educate them about any inspection deadlines. Using the AAR Residential Purchase Agreement, the default initial Inspection Period is 14 days from the Agreement Acceptance Date. If the parties are requesting a radon inspection, sewer/septic inspection, termite/Wood Infestation Inspection Report, or survey, they will need to negotiate a “Secondary Inspection Date,” which is the date by which these additional inspections must be completed.

Assignments

If a Purchase Agreement for a single-family residence is being assigned, Alabama Code § 8-42-2 requires that the original seller be notified of the assignment at least 3 business days before the assignment contract becomes effective. Not only can missing this deadline constitute a breach of contract, it is also a misdemeanor offense and carries significant monetary penalties. It is recommended that any consumer who wishes to assign a Purchase Agreement consult an attorney to ensure that they are doing so in compliance with Alabama law.