real estate

Homebuyer wants real estate 'grace period'

Steve McLindenQuestionDear Real Estate Adviser,
What is the grace period to cancel a real estate contract to buy a single-family house? Don't you typically have three days? I am located in Florida.
-- H. Cruz

AnswerDear H.,
Unless there is a provision in your sales contract that allows a certain number of days for parties to cancel without penalty, there is no such automatic grace period in Florida and most other states.

One exception is New Jersey, where both parties signing a residential real estate contract have three business days to cancel by giving the appropriate notice. It's worth noting that several states have opt-out grace periods in the purchases of condos, co-ops and other common-interest communities that are applicable under certain conditions.

An almost unlimited number of clauses can be added to sales contracts as safeguards for buying and selling parties, including financing contingencies, attorney-approval contingencies and optional extension periods for buyers. But unless you or the other party thought to add such clauses into the contract, there are no inherent automatic "outs."

Certainly, if one party fails to perform to contractual expectations and obligations -- or there's indication of fraud, misrepresentation or nondisclosure of pertinent property conditions by the seller -- the offending party can be held in breach of contract.

Some breaches allow one or both parties the option of canceling the contract. Or, a party may sue for "specific performance." However, the latter action is relatively uncommon, seldom successful and often prohibitively expensive.

Of course, you or the other party has the option to request a release from a real estate contract. When one party becomes reluctant, the other often will relent.

Just to make sure we're on the same page here, don't confuse cancellation grace periods with the three-day federal "right of rescission" law, which does not apply to mortgages obtained to buy a property. The right of rescission in residential real estate applies only to borrowers who are refinancing, getting a line of credit or obtaining a home equity loan and who are using their principal residence as collateral to secure it.

There are rescission, or "cooling off," periods that apply to other consumer purchases relating to door-to-door, trade show or Internet sales. Grace periods for time-share purchases also exist now, due largely to high-pressure sales pitches and high volumes of consumer complaints. Those periods are typically determined by individual state and local laws, however.

Time for a reminder: A real estate purchase contract, like any legal contract, is binding from the moment that buyers and sellers affix their names to it. The time to build in any buffers or safeguards is during the creation of that contract.

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