Recently, I’ve fielded several phone calls from agents asking for clarification regarding the delivery deadline for the earnest money and option fee.
You may recall that paragraph six of the One to Four Family Residential Contract states that buyers must deliver the earnest money to the escrow agent within three days. However, it then states that if the third day falls on a weekend or legal holiday, the deadline is extended to the next business day. Many agents are confused by this, though, because they think that all weekend days and legal days are excluded from counting the delivery days.
For example, let’s say the contract’s effective date is on a Thursday, so the agent counts Friday as day one, skips over Saturday and Sunday, and counts Monday as day two and Tuesday as the delivery deadline for the earnest money. This is incorrect. If the effective date is on Thursday, then Friday still counts as day one, but Saturday is counted as day two. Since day three is a Sunday, the delivery deadline falls on Monday.
If the buyer’s agent misunderstands this, mistakenly tells their buyer they have until Tuesday to deliver the funds, and the deadline is missed, the seller has the right to cancel the contract. Of course, this right of cancelation is nullified if the earnest money is delivered at any point after the deadline and is accepted by the escrow agent.
When it comes to the option fee, paragraph 23 of the One to Four Family Residential Contract sounds similar to paragraph six: The buyer has three days to deliver the option money to the seller (or by extension, their broker).
The difference is that there is no exception for weekend days and legal holidays, and the rationale behind this is simple. The option money is delivered to the seller or their broker, and they’re both assumed to be available seven days a week. The earnest money is delivered to the escrow agent, and most title companies aren’t open on weekends or legal holidays.
If you’re still unsure about the delivery deadline for either of these fees or have any other real estate questions, don’t hesitate to give me a call. I’m here to help.