In Arizona, the majority of the purchase contracts related to residential property are executed using The Residential Resale Real Estate Purchase Contract, a boilerplate contract approved by the Arizona Association of REALTORS®.

Lines 13 through 16 state the following:

“Close of Escrow: Close of Escrow (“COE”) shall occur when the deed is recorded at the appropriate county recorder’s office  Buyer and Seller shall comply with all terms and conditions of the Contract, execute and deliver to Escrow Company all closing documents, and perform all other acts necessary in sufficient time to allow COE to occur on [MONTH] [DAY], [YEAR] (“COE Date”).

In addition, it states on lines 322 and 323:

“Time of the Essence: The parties acknowledge that time is of the essence in the performance of the obligations described herein.”

So, what does this mean?  One may infer that it is simply implying that everybody needs to hurry up and make sure that the transaction closes by the close of escrow date.  However, there is a little more to it.

Time is of the essence is a legal term used in contract law which indicates that the parties to an agreement must perform by the time to which the parties have agreed if a delay will cause material harm.  see Foundation Development Corp. v. Loehmann’s Inc. 788 P.2d 1189 (Ariz. 1990)

Based on this, a delay in the closing of the real estate transaction causes a breach of contract.  Assuming that the breach was caused by the buyer, this could lead to as little as a cancellation of the contract and as much as a lawsuit to recover losses incurred offended party.  As such, if a party to a real estate purchase contract believe that there is a potential for exposure due to a breach, they should seek the advice of his or her attorney.  Even if the offended party must prove that the delay caused material harm, the defense process alone results in stress and frustration and the loss of time and money.

One way to mitigate this risk is by using the services of a team of high-qualified mortgage professionals.  We, the team at Academy Mortgage in the Mesa office, are confident that we have the experience, knowledge, logistics and track record to help you close your transaction on time.  We invite you to review our Ten Day Close Guarantee.   Please feel free to contact us today so that we can be of service to you.

480-892-0000

About the Author:

Steve Lines is a seasoned, bilingual mortgage professional who has been a top-producing loan officer since he began his mortgage career in 1996.  He is an Arizona native, an accounting graduate from Arizona State University and a former “Big 4″ auditor.  In addition to helping manage Arizona’s best mortgage office and personally originating, he also is a licensed instructor through the Arizona Department of Real Estate (Instructor No. I09-0090) and enjoys teaching at the Arizona School of Real Estate and Business, the premier Real Estate School in Arizona.

Courses that he is currently teaching include:

Real Estate Professionals:

• Contract Writing for Today’s Financing
• Latest Marketing and Selling Techniques (Marketing through Social Media for Real Estate Agents)
• Agency and the Use of Electronic Media
• Accounting for Start-Up Real Estate Brokers

Mortgage Professionals:

• Loan Originator Sales and Marketing
• Compliance with Federal Law (CE for AZ Mortgage Brokers and Mortgage Bankers – AZDFI)
• Compliance with Arizona Statutory Law and Regulations (CE for AZ Mortgage Brokers and Mortgage Bankers – AZDFI)