When Does a Buyer Need to Sign Loan Docs

timthumbFrom the inbox this morning …

“If loan docs are not signed three days prior to close of escrow, can the seller cancel the contract?”

Ah, yes … you can can feel the love brought on by a strong seller’s market, can’t you?

In any event, let’s start with the disclaimer that I’m not a real estate attorney, this only is one man’s opinion, mileage may vary, etc.

The answer is no, not if the parties were using the Arizona Association of REALTORS Residential Purchase Contract.

Deep in the contract, around page seven of nine, there is a section that introduces a Cure Notice. Basically speaking, if one side or the other does not perform one of their duties in the contract, they are not automatically in breach. The offended party, for lack of a better term, has to send a Cure Notice to the potentially breaching party, notifying them that they’ve been a naughty girl or boy. The potentially breaching party then has three days to correct the potential breach. If they do, all is well and the contract marches on. If not, then they really are in breach and the offended party can cancel.

Easy enough?

So in the case of loan docs that weren’t signed three days prior as required by the contract (it’s actually four because the contract views days as full 24 hour periods – don’t ask, just go with it), all a seller can do is send a Cure Notice to the buyer, which triggers the three-day Cure Period and gives the buyer three days to sign the docs. Only then can the seller cancel.


Now the second half of this is why would a seller be so anxious to cancel? And that takes us back to 2005, when the market was appreciating noticeably from week to week and sellers were more than happy to watch a buyer walk away because an even less cautious and price-sensitive person would be waiting.

We’re not at that point here in Phoenix. Not quite.

Low inventory continues to drive prices higher in an unsustainable manner, appraisers are starting to come along for the ride and there seems to be no end in sight. Except there is. Should interest rates move higher and, horror of horrors, buyers have to pay 4 or even 5 percent interest – rates that still are ridiculously low in a historical sense – or if inventory should rise appreciable, the party could stop on a dime.

Incidentally, I should mention that sellers have virtually no “outs” once their home is under contract. Sure, they can refuse to make any repairs and generally annoy the buyer but the ultimate decision rests with the buyer all the way down the line – unless, of course, the buyer leaves an opening that the seller can “cure” their impotence.

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.