When the buyer or seller is not following the stipulations of the contract, you can issue them a Notice to Perform. Once this Notice is given, they will have a certain amount of time to make the required action or you can cancel the contract. The new Residential Purchase Agreement defaults this period to 2 days. So for instance, if the buyer has not removed their contingencies, the seller can issue the Notice to Perform. If two days after the notice has been delievered, the buyer still hasn’t removed their contingencies in writing, then the Seller can cancel the contract and return the buyer’s deposit. Keep in mind, that within this contract, Time is of the Essence. If the seller waited 5 days after the two day waiting period (or one week after they issued the Notice to Perform), they would have to issue a new Notice to Perform to the buyer if they wanted to cancel. In effect, the Notice to Perform has an expiration due to the “Time is of the Essence” clause in the contract.
Someone asked me today if it made sense to make a back up offer on a short sale. I think it’s a good idea. Short sales can take an average of 4 to 6 months to get lender approval. Several lenders are currently rolling out new systems in hopes of delivering short sale approvals on a more expedited schedule, but until this happens, you should expect a long waiting period. Because it can take a great deal of time, it’s not uncommon for the buyer to walk before the lender makes their decision. Many buyers will find alternate properties while waiting for the bank. So in this scenario, a back up offer would be able to step up and enter into a contract with the seller. Now, don’t get any silly ideas that the process would move more smoothly because the lender has already approved the short sale. If you have ever seen any lender approval letters, you would notice that the lender stipulates that the approval is granted only for this particular buyer. If a new buyer comes into play, the lender will take a few steps back and start much of the process all over again. It could still be several months before you receive your approval letter and are able to open escrow. I did encounter this situation recently. I had clients who made an offer in June 2009. They were not the accepted offer, but we let the listing agent know that we would like to be a back up. In the mean time, my clients continued to look for another property. In October 2009, the short sale approval came through, but the seller had lost their buyer. My clients were next in line. They entered into contract with the seller, and then they waited and waited… until finally we received written short sale approval in the beginning of March 2010. We were able to close escrow in the first week of April, nine months after they submitted their original offer! It always seemed like a long shot and something just sitting there on the backburner, but it turned about to be the best move. My clients have a new home that they love.