The Answer is in Front of You (ASR)

The Answer is in Front of You

By James L. Goldsmith, Esq.

The agreement of sale (ASR) is always the epicenter of any transaction. Sometimes, we get bogged down in extra steps and forget that the ASR holds the key.

In this example, the ASR was contingent on the outcome of a home inspection. The sellers had taken good care of their home, so they were shocked to receive a Reply to Inspections demanding multiple repairs. "But with the market as it is," offered the listing agent, "you better look twice." And the sellers did and they were still unhappy.

The listing agent then offered to buy some time for the sellers. She put aside the buyers' Reply to Inspections and drafted a Reply extending both the settlement date and the expiration of the home inspection contingency period. This would allow more time, she reasoned, to negotiate which, in turn, would cause the buyers to come out of the stratosphere and get reasonable.

The sellers' Reply to Inspections, like the buyers, sat. Neither was signed. And negotiations continued, with some progress made. Still, the parties could not agree. And as the days remaining in the original inspection contingency period waned, the parties began wondering what rights they had.

The sellers claimed that the buyers were stuck buying the property in its present condition because the buyers had failed to respond within two days of receipt of sellers' reply to the buyers' corrective proposal. Buyers claimed that they were still in the inspection contingency period and thus retained the right to terminate. Who's right? Why?

We'll start with the why. Why, because the agreement of sale says so. It is the center of the transaction. It is designed to be as comprehensive as possible, taking into consideration many circumstances that may or may not occur in any transaction. For our transaction, we turn to the Inspection Contingency. As per the agreement, the buyers timely submitted a corrective proposal in the form of a Reply to Inspections (the one asking for extensive repairs). Next in our analysis is to review sellers' options.

The same Inspection Contingency gives the Seller five days from the end of the contingency period (not five days from receipt of buyers corrective proposal) to respond. Actually, the agreement doesn't give the seller a right to reply, rather it gives seller the choice of informing buyer that seller will or will not satisfy the terms of buyer's proposal. Of course, parties to an agreement can always agree to amend their agreement. But if the parties cannot agree, then the only actions available are those provided in the agreement.

What did our sellers do? They did not agree to satisfy buyer's corrective proposal, nor did they inform the buyers that they would not satisfy it. Rather, they went outside of the agreement and proposed to extend the inspection contingency period and settlement. And because these extensions are not an option that sellers can unilaterally impose, they require the buyer's consent, which they did not get.

Since the sellers failed to offer a proper reply to buyers' corrective proposal, and since the buyers did not sign the extension offered by seller, we are left with....that's right, the agreement of sale. It provides that if the seller fails to choose an option (satisfying or not satisfying buyers' corrective proposal), buyers may, within two days from the end of sellers' opportunity to reply to corrective proposals, (the inspection contingency period, plus five days permitted for sellers reply), to terminate. And, over the sellers' objection that sellers had replied to buyers' corrective proposal and that buyers had failed to terminate within two days of the reply, that's just what buyers did. And they were right!

If you are confused, blame it on the author, or go back and reread, slowly, methodically and with a copy of the agreement at your side. After all folks, the agreement is the epicenter of your livelihood. Complex or not, you must know it, or at least understand that you must always turn to it to see the exact road to follow.

Mr. Goldsmith is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline. He may be reached at realcompliance.com.