We are in the process of buying a home in PA. Upon accepting our offer, the seller asked us to sign a "Time of Essence" addendum which awards them 2% of the purchase price monthly, prorated on a daily basis, for each day the deal goes past the closing date if closing was delayed "due to the purchaser's actions". Is this a common request from sellers at this point in a real estate transaction? Is that an unusually high penalty to pay for a delayed closing date? Is the phrase "due to purchaser's actions" too vague?
Answered on: 6/14/11, 9:42 am by Miriam Jacobson
It is not a customary request. If it was marked on the agreement that you signed and it was added together with the seller's signature, that was not an acceptance of your offer, it was a counter-offer, and you do not have to agree to it.
There have been occasions when settlement was delayed because of, for example, the buyer's mortgage not being ready. The seller is carrying it's own mortgage and other expenses, and may be delayed in the seller's purchase of its next home, or may have already purchased the new home and is now carrying 2 mortgages. In order to extend the closing date, I've seen buyers and sellers agree on the buyer's picking up some of the seller's expenses, often by an adjustment at settlement.
The amount should be substantiated in some way so that it's not just an arbitrary amount.
"Due to purchaser's actions" could be refined, for example, to limit it to purchaser's own action or failure to act when it should have. The buyer doesn't want to give up rights under an inspection or mortgage contingency if the deadlines for a contingency would cause missing the deadline for closing.
The examples I've given are not meant to be the only ones, nor should the language be used without getting legal advice.
This response is not legal advice, since I do not have all of the information that would be required, and I do not have a representation agreement with you.
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Law Offices of Miriam N. Jacobson 1900 JFK Blvd. Suite 1519 Philadelphia, PA 19103-1431► Other answers from this attorney