Notice To Perform - The Facts

Notice to perform is one of the most often misunderstood clauses of a real estate purchase contract. Both buyers and sellers routinely ask me how the notice to perform works. Here are the facts:

• Notice to perform is a protection afforded to buyers in a real estate purchase contract that stipulates a "warning period" or notice period to the buyer from the seller if a contractual obligation is not meant.
• By Default, the notice to perform time frame is 24 hours, though I will most often attempt to extend it for my buyers to 48 hours or 72 hours.
• The seller can not take action against the buyer for missed contractual obligations without first giving the buyer a written notice to perform that is good for whatever amount of time was negotiated in that particular purchase agreement.
• If a seller does give a buyer notice to perform and the buyer still does not execute their obligation, the seller is now in their right to cancel the deal. However, the deal is not automatically canceled and the seller can choose not to. They simply just have the power to do so if they deem that the buyer is not going to perform in a way that is satisfactory to the seller.
• If a seller does cancel the deal, attention always turns to the earnest money deposit. Who get's it?
• If all contingencies have been removed, the seller has the rights to the deposit money. If not then it still belongs to the buyer.

As a real estate agent, I can tell you that there are many times that buyers go over their allotted time for different contractual obligations and the threat of a notice to perform comes in to play. Most of the time the buyer really does intend to perform but the escrow hits some kind of unforeseen bump and a little more time is required.

The two issues where this pops up the most are around negotiating request for repairs, which is tied to the investigation contingency, and loan contingency. Not coincidentally, these are the two issues during an escrow that require the cooperation of other people. For investigations it requires scheduling an inspector and negotiating repairs with the seller, who has to be available to do so. For the loan it is very much in the hands of appraisers and sometimes unreasonable underwriters.

Most sellers understand the issues that come up and will work with a buyer without issuing a notice to perform, but it does become a looming threat. That is why I like to extend the time frame when I represent buyers. It helps keep real estate deals from failing.

If there are still more questions regarding how notice to perform works please comment below and I will answer all questions.