Real Estate Legal Trivia
That question is HUGE in residential real estate, for a number of reasons.
The three biggest:
One. The “Final Acceptance Date” — when the deal’s officially a deal — starts the clock running on the Buyer’s Inspection Contingency (Buyers typically have 3-5 business days to inspect, once the ink on the deal is dry).
A Buyer who doesn’t perform their inspection during that interval waives it (yup, waives it).
Two. Once a house is sold — even if it’s subject to multiple addenda and contingencies — no one else can buy it.
Especially in a seller’s market — which several Twin Cities neighborhoods are in at the moment – Buyer #2 has a funny way of showing up, just as the Seller and Buyer #1 are finishing things off.
If the Seller and Buyer #1 leave the door ajar, even just a little, another Buyer (with perhaps a richer offer) can step through it.
Three. Once the Purchase Agreement is fully executed, the earnest money is due.
Buyers can be pokey about delivering the earnest money check, especially when everyone’s attention is focused on the upcoming inspection.
However, it’s due as soon as the Buyer and Seller have completed signing the contract, and the now-fully executed contract has been delivered to the other party (the technical requirements is that the contract be delivered to the other party’s agent).
A Buyer who claims there was no contract because they never delivered the earnest money is: a) wrong; and b) actually breaching the contract, risking damages or other legal recourse by the Seller.
Bonus question: if the Buyer never delivered their earnest money, what was the “consideration” — a prerequisite for every legal contract — for the deal?
The Buyer’s and Seller’s mutual promises to one another (called a “bilateral contract,” if I recall correctly from law school).
P.S.: Reason #4 to precisely track when a deal is consummated: there’s nothing more frustrating as a Buyer’s agent than to have a showing go especially well, than call up the listing agent only to be told that “the home is already under contract.”
Quickly followed by a “sorry” or “oops.”