Real Estate Help Library Cure Notice Buying, Paperwork, Selling

Notes:

I am not a lawyer and none of the information in this article should be construed as legal advice. The purpose of this article is to help explain in layman’s terms what is in the purchase contract and the cure notice described in the purchase contract. If anyone needs or wants legal advice, they should get it from a lawyer.

Cure Notice

A cure notice is essentially a notice from one party to the other that they believe the other party is in breach of contract and they would like you to fix the problem or else they may cancel the contract and potentially be entitled to the earnest money. Here’s what the Purchase Contract says about cure notices:

” A party shall have an opportunity to cure a potential breach of this Contract. If a party fails to comply with any provision of this Contract, the other party shall deliver a notice to the non-complying party specifying the non-compliance. If the non-compliance is not cured within three (3) days after delivery of such notice (“Cure Period”), the failure to comply shall become a breach of Contract.”

There is an entire section of the contract dedicated to covering what happens in these situations, and I am not covering every single section, just the overview of what it means and what happens when someone has to deliver one.

"A cure notice is essentially a notice from one party to the other that they believe the other party is in breach of contract and they would like you to fix the problem..."

Section 7 of the Purchase Contract

Essentially a cure notice is 2 things:
1) A notice that someone is in breach (or you think they are)
2) A chance to fix it

It’s like a grace period. If one party fails to close escrow, or deliver a document promised, or do anything spelled out in the contract, the answer is a cure notice.

Cure notices always have 3 days to fix the problem, not counting the day of delivery.

Example:

Seller fails to deliver SPDS as outlined in section 4a of the contract within 3 days of contract acceptance. On day 5 (let’s call it Wednesday) they deliver the cure notice.

Result:

The seller has until 11:59 PM Saturday to deliver the SPDS, or else will be in breach of contract.

What to do if the problem is not fixed

In the example above, the SPDS is due on Saturday at 11:59 PM. On Sunday, if the seller has not cured the problem (in this case by delivering SPDS) the buyer can cancel the contract and receive earnest money back.

What happens to other money spent, such as appraisals and inspections?

Technically, these are the responsibility of the buyer to pay for, unless otherwise specified in the contract. Any money they chose to spend on the inspection, is their costs incurred. The buyer could theoretically sue for damages in civil court, but I am not a lawyer and cannot comment on the legality or whether or not this is something they could or would do, or what they outcome may be in this situation.

As far as the Purchase Contract is concerned, the buyer is entitled to receipt of earnest money only. Any other damages incurred will have to be handled in civil court.t

Who decides where the earnest money goes?

According to section 3f of the purchase contract:

“In the event of a dispute between Buyer and Seller regarding any Earnest Money deposited with Escrow Company, Buyer and Seller authorize Escrow Company to release the Earnest Money pursuant to the terms and conditions of this Contract in its sole and absolute discretion.”

 

So it is the title company. The purchase contract also dictates that the buyer and seller agree to mediation before going to court in section 7c of the Purchase Contract:

Buyer and Seller agree to mediate any dispute or claim arising out of or relating to this Contract in accordance with the REALTORS® Dispute Resolution System, or as otherwise agreed. All mediation costs shall be paid equally by the parties. In the event that mediation does not resolve all disputes or claims, the unresolved disputes or claims shall be submitted for binding arbitration. In such event, the parties shall agree upon an arbitrator and cooperate in the scheduling of an arbitration hearing. If the parties are unable to agree on an arbitrator, the dispute shall be submitted to the American Arbitration Association (“AAA”) in accordance with the AAA Arbitration Rules for the Real Estate Industry. The decision of the arbitrator shall be final and nonappealable. Judgment on the award rendered by the arbitrator may be entered in any court of competent jurisdiction. Notwithstanding the foregoing, either party may opt out of binding arbitration within thirty (30) days after the conclusion of the mediation conference by notice to the other and, in such event, either party shall have the right to resort to court action.

 

I include this section in full because there’s a lot in here.

  • Buyer and seller agree to mediation
  • Costs shall be split equally
  • If there are still disputes, it goes to arbitration
  • Either party can opt out of arbitration and resort to civil court.

“In the event of a dispute between Buyer and Seller regarding any Earnest Money deposited with Escrow Company, Buyer and Seller authorize Escrow Company to release the Earnest Money pursuant to the terms and conditions of this Contract in its sole and absolute discretion.”

Purchase Contract section 3f lines 144-148

Notice of cancellation

Assuming the offending party has not been able to fix the problem, the party that issued the cure notice will submit a notice of cancellation.

Notice of cancellation

This is simply notifying all parties that they intend to cancel the contract and acts as instructions to the title company to close the escrow account and distribute funds back to where they need to go.

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