When it comes to the multi-million dollar homes in the Hamptons real estate market, issues not addressed at the proper time and in the proper manner may prove problematic in selling and buying a home. One such issue has to do with property transfers. Typically, when the real estate broker is representing the seller, the broker establishes at the listing appointment the terms the buyer must satisfy to meet the definition of "ready, willing, and able buyer." The broker should also establish the seller's obligations to the buyer.
Previous articles have covered the subjects of mortgage contingencies, certificates of occupancy, etc. One that is no less critical is when the purchaser will be able to pay the sum of money due at closing and when the seller will be prepared to surrender occupancy. A full-price offer, contingent upon the sale of the buyer's existing property, may not be as desirable as a lower price offer where the ability of the buyer to close is not contingent on the sale of their existing property. Conversely, a seller whose ability to surrender occupancy is contingent upon finding a replacement property may not be an attractive prospect to a purchaser.
This issue will be incorporated in the contract, but the broker addresses it before the attorneys become involved and the contract is prepared. Failure to address this critical issue could prevent the transaction from moving forward. The language of the contract should only formalize what the parties to the contract understood and agreed to at the time of offer and acceptance.
Ordinarily, the contract will specify where and when the closing, or transfer of title, will take place. For instance, the closing would take place at the seller's attorney office on or about a particular date. The phrase "on or about" implies that if, for "good cause," either party were not able to close on that date, the other party would agree to close on another date without considering the party requesting the postponement to be in breach of contract. This is the preferred arrangement if it is not essential that either party must close on a specific date. For example, the seller has to close on a property he is purchasing with the proceeds of the sale of his existing home the very next day. Or, if the buyer has to vacate their existing property on a certain date and would have nowhere else to go. Under these circumstances, the contract may read, "time is of the essence." This means that if either party were not able to close on that date, the other party could hold that party in breach of contract subject to all of the consequences as stated in the contract for breach.
Obviously, this is not a situation either party would want to confront. Whether the situation can be resolved will often depend on the circumstances and the willingness of the parties involved. What is clear, the broker plays a vital role in preventing this situation from developing if these issues are clarified before bring the seller and buyer together.
John is a St. John's University graduate, licensed Real Estate Broker, DOS Certified Instructor, and real estate consultant. He previously taught at NYU, LIU, and The Cook Maran Real Estate School, which he helped found.