In a recent email, I talked about "time is of the essence". That wording is in the current MLS contracts, clause 3.1 (c). To re-cap, sellers do not have to extend completion dates.

I received a lot of responses to that email, comments like:

"Can this really happen?"

"I've never run into this."

"Why would the seller do this?"

"Will the buyer lose their deposit?"

Yes it can happen. We all know many deals close late and it's rare for a seller to refuse to give an extension. I think I've only had a couple of these in my whole career.

But, if a seller wanted to, they could rely on the 'time is of the essence' clause that is in our standard MLS residential contracts.

Practically, sellers almost always agree to extend closing dates. Legally, they don't have to.

The place where this is really dangerous is in a rising market with a long closing date or where the seller has a better offer, or sometimes it's just seller's remorse. Either way, the property value has gone up or the seller has regrets and they just don't want to close with the current buyer. 

For example, back in the craziness of 2005-2007, prices were going up, in some cases, 10% per month! I recall sellers who had written deals with five-month closing dates and who were watching their 'sold' properties increase rapidly in value. They were asking me how they could get out of the deal.

One of the answers was "If the buyer doesn't close on time, you do NOT have to give an extension."

And, if the seller refuses to extend, the buyer would lose their deposit and be potentially subject to further damages if the seller decided to sue them. Remember: Five minutes late is late!

I understand that once the deal is unconditional, timing is really out of your hands. But, whether you are on for the buyer or the seller, it's important for you to be aware of this concept.

Keep your ears open. If you hear about potential delays, decide whether you need to explore further with your client. 

Protect yourself.

Cheers,

Barry

I'm taking on new clients. Please consider me and Field Law when you write your next deal.