The "Settlement" section of a standard Virginia real estate contract reads....

Settlement shall be made at the office of the Purchaser's settlement agent on or about October 1, 2008.

Did you catch the three small words so innocently wedged between the location and date of the closing?  The meaning of those three words (on or about) is often overlooked!

Some sellers think, or assume that the date filled into the contract will be the actual closing date.  It very well might be --- but oftentimes a buyer or seller's circumstances will shift it a few days in either direction.  So, the first thing to remember is that it is usually just a close estimate of when the closing will occur.

But what happens if (in the above example) a buyer informs the seller that they won't actually close until October 22nd --- three weeks later.  May the seller indignantly demand that the buyer close on October 1st, OR ELSE?  Contractually, no!  "On or about" is typically understood to mean plus/minus 30-60 days, depending on the attorney.  That certainly allows for some flexibility, and this is the second thing to remember --- the standard contract language will not allow you to precisely plan the day or week of closing.

So, what is a seller to do?

BAD:  If you need to close on a precise date, or no later than a particular date, you'll want to add "time is of the essence" to the standard contract language.  With such language, if the settlement does not take place by the date in the contract, the contract automatically becomes null and void.  Of note -- I rarely suggest using "time is of the essence".  Having the contract "die" after a certain date usually doesn't help either the buyer or the seller.  If the buyer wants to buy, and the seller wants to sell, and the final closing documents are one date late, should the deal really automatically die??

BETTER:  A better option is to introduce a (positive or negative) financial incentive for the buyer to close in a timely fashion. Perhaps a positive financial incentive for closing on (or before) the scheduled closing date.  Or, an increased purchase price or other penalty if the closing is more than X days later than scheduled.

BEST:  Leave well enough alone --- don't change the standard contract language.  Understand the above, but be flexible and willing to adjust, within reason to make the closing process smooth and successful. 

I hope this is clear --- feel free to leave a comment below, or call/e-mail me for further clarification.

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Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com