The Effective Date on a Real Estate Contract
When asked to describe her idea of a perfect date in the movie Miss Congeniality, the Rhode Island contestant replied, “That’s a tough one. I’d have to say April 25th. Because it’s not too hot, not too cold, all you need is a light jacket.” Funny as this may be, dates are one of the most critical elements in a real estate contract and staying on top of them can make all of the difference in a real estate transaction. But, they can be confusing if you don’t know where to begin. One of my most favorite dates is the effective date, and here’s why:
Let me first start with an introduction. The effective date is in the running to be considered the most important date in an entire contract. Why, you ask? Because it is the date off of which all other dates are based. It’s serious business.
What exactly is it? The effective date is the date that all parties agree to all elements of the contract. In simpler terms, it’s when everyone signs off on everything. (Look at Page 9 of the One to Four Family Residential Contract (Resale) to see where the effective date is added.) If everyone is not in agreement, the effective date cannot be completed.
Who fills it in? The real estate agent or broker representing the last party to sign off on a contract should be the one to complete this date on the contract. When that date is filled in, the other party should be notified as well and any dispute over this date should be addressed immediately.
Why does it matter? Many of the other terms of the contract specify that tasks must be performed within X number of days. The effective date gives you that starting point.
What counts as a day? The effective date lets you know when everyone agreed, but sometimes that agreement happens at 8AM, while other times it happens at 10:30PM. So the first full day after the effective date is day one of all other timeframes in the contract. Take note: a real estate contract uses calendar days, so holidays and weekends do count.
When is the last day? The last day ends at 11:59PM on whatever day is the last date of the term.
Examples of the Effective Date in Practice
Question: If the effective date of a contract is November 1, when does a ten day option period end?
Answer: 11:59PM on November 11. New timeline for option period: the option period now expires at 5pm local time where the property is located on new contracts (forms went into effect on January 1, 2016).
Question: If the buyer submits an offer on December 8 and the seller signs off on it as written on December 9, what is the effective date?
Answer: December 9.
Question: When would a ten day option period end?
Answer: 11:59PM on December 19. The option period expires at 5pm local time where the property is located on new contracts (forms went into effect on January 1, 2016).
Still confused? Try calling one of our real estate experts. A great agent can help you to stay on top of all of the details and get you to our next most important date – the closing date.
image courtesy of prasad.om
