What Is a 'Time Is of the Essence' Clause?

In the area of real estate, you will sometimes see a "time is of the essence" clause in a contract. Here are the basics of the "time is of the essence" clause and what it means to you.

Time is of the Essence

When this clause is included in a real estate contract, it means that things have to be accomplished in a reasonable amount of time. If the seller includes this clause, it means that the buyer has to act quickly when it comes to acquiring financing for the property and moving forward with the purchase.

Implications

Whenever this clause is included, the parties of the contract have to act quickly. It is determined that one of the parties does not live up to this part of the contract, they could be penalized. For example, if the buyer does not act within a reasonable amount of time to secure financing, the seller can back out of the contract and seek out an alternative buyer. In many cases, this clause has led to lawsuits being filed between the buyer and seller of a piece of property. Therefore, whenever this clause is present in one of your contracts, you want to make sure to act as quickly as possible.

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