Customarily found in real estate contracts, "time is of the essence" represents the necessity for the timely completion of a contract. The clause is something that agents may use colloquially to emphasize the importance of meeting deadlines.
Transactional delays which are avoidable often pertain to planning and management, eg, a delay in financing as a result of a lender delay on ordering an appraisal until week 2 or 3; or underestimating the time necessary for a condition within a transaction to be met. Let's visit a few of the typical delays in Michigan real estate transactions which could often be avoidable:
Delays in receiving association documentation
Background: Associations can include attached condominiums, detached condominiums or single family homes with homeowners associations; if your Michigan home is in a neighborhood of similar-looking homes and was built 1980s or newer it probably has a homeowners association which manages common areas of a community such as entrances, lawn care, snow removal, road maintenance, etc. Because of that shared maintenance costs and liabilities, lenders and title companies require status letters showing that the home being sold is current and does not have any outstanding association dues, fees, or liens against the property.
Potential problem: Lenders require an examination of meeting minutes, detailed financials, financial balances and reserve funds. Depending on the association, producing this documentation may take from 5 to 10 days to upwards of 3 or 4 weeks and the management companies and associations which process these status letters and documentation requests typically charge fees and some offer a rush order option for an additional fee to expedite the process. The condo association transfer fee varies depending on the community but $200 or $500 would be within the realm of normal for an Ann Arbor condo. The turn times for processing this documentation can also be extended if eg a mortgage underwriter has questions about the contents or formatting of the information in the association docs.
Solution: Make all condo doc requests as early on as necessary to be ahead of the association's processing turn times. Since the fee is due up-front at the point of ordering those docs, some title companies can handle this as part of their process and either collect the fee from the seller or buyer, or (with approval) cover it themselves and debit the customer for the cost at closing. If the buyer's lender needs to review these docs, doing it early will ensure they have enough time to obtain any further information or clarification as needed.
Delays in sale contingencies
Background: A home sale contingency is when a purchaser needs to complete the sale of another property prior to settling on the subject property. Home sale contingencies are particularly common in higher-end property sales where the pool of eligible purchasers is restricted due to affordability limitations (sale contingency allows buyer to pull equity from their existing home to complete their new purchase); and in markets with low-to-no inventory there tends to be more home sale contingencies built into offers so that purchasers can secure their next property ahead of selling their existing home as opposed to selling their home before buying and having to rent or find other accommodations until a suitable next purchase comes available for sale.
Potential problem: A figurative way of thinking about this would be like a train heading down its tracks towards its destination. Adding in a sales contingency would be like adding another car onto the train -- each additional car (or sale contingency, if you will) can cause the whole train to be delayed based on whatever issue is holding up any one of the cars (or contingencies) from moving forward, so the entire sequence may only move as quickly as its slowest portion. When you have a purchaser buying a home with a sales contingency who accepts an offer on their home which is itself also contingent on the sale of another asset, your figurative train now has 3 cars and the likelihood of some kind of delay increases because each of those purchases may need to be inspected, appraised, financed, etc. If 1 of the transactions falls apart it may jeopardize the others which require its timely sale.
Solution: An ounce of due diligence is worth a pound of cure with sales contingencies. As a listing agent we want to advise our sellers on the likelihood and expected timeliness of the purchaser's sale being finalized; is their asset easily sellable? Is it priced according to what the market will bare for the asset that must be sold prior to settling on our client's property? Is the buyer open to accepting contingent offers for their own sale (resulting in the aforementioned metaphor of a train with 3 cars)? While negotiating a contract involving sales contingencies, listing agent may ask for limited time clause language to be added into the contract for the purpose of capping the amount of time that the buyer can take in order to sell their home.
While there are many reasons a real estate transaction can wind up delayed or collapse entirely, these 2 problems are very typical particularly in today's Ypsilanti and Ann Arbor real estate markets. It's no surprise to see that Washtenaw County continues as a popular choice for homes and condominiums for sale.