Question: The builder of my new home experienced delays. Through our realtor, we agreed to extend the closing date. When the new closing date arrived, the builder was still not ready. We refused to extend further, but he was able to use a special clause in the contract. Apparently, he had 30 more days to get ready. We were surprised about the special contract clause. Is this common?
Answer: Yes, most purchase and sale contracts have a 30-day extension clause. It can be a good thing for both parties.
For a buyer, the extension clause can prevent a seller from refusing to sell, by taking advantage of a minor title or condition issue. For your seller, he was able to have extra time to get the property finished. Overall, the clause is intended to keep the parties working together in good faith if the property is not ready to sell.
It is important for attorneys and brokers to remember these extra 30 days, when agreeing to extend closing dates. Here is the common scenario: A seller is not ready to close, so the parties simply amend the contract’s closing date. Instead, buyers’ attorneys or brokers should consider “burning off the additional 30 days”. This may give a buyer leverage against further delay. However, a buyer risks losing the deal, if a seller still can’t close at the end of 30 days.
During contract negotiation, this 30-day extension clause is often altered to a) limit the number of days, if a buyer’s mortgage rate is affected by the delay, and b) limit the amount of money a seller must pay to comply with the clause. These “what if” scenarios are important to consider in each deal, and represent the value a real estate attorney provides.
Answer: Yes, most purchase and sale contracts have a 30-day extension clause. It can be a good thing for both parties.
For a buyer, the extension clause can prevent a seller from refusing to sell, by taking advantage of a minor title or condition issue. For your seller, he was able to have extra time to get the property finished. Overall, the clause is intended to keep the parties working together in good faith if the property is not ready to sell.
It is important for attorneys and brokers to remember these extra 30 days, when agreeing to extend closing dates. Here is the common scenario: A seller is not ready to close, so the parties simply amend the contract’s closing date. Instead, buyers’ attorneys or brokers should consider “burning off the additional 30 days”. This may give a buyer leverage against further delay. However, a buyer risks losing the deal, if a seller still can’t close at the end of 30 days.
During contract negotiation, this 30-day extension clause is often altered to a) limit the number of days, if a buyer’s mortgage rate is affected by the delay, and b) limit the amount of money a seller must pay to comply with the clause. These “what if” scenarios are important to consider in each deal, and represent the value a real estate attorney provides.
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