What happens if a Agreement of Sale expires???

5 Replies

Hi all,

I am supposed to close on a Duplex today.  However, the seller has not gotten municipal required inspections completed yet (heater certificaiton and electrical certification).  Both of these are outstanding and are identified in the contract to be ordered at the seller's expense no later than 15 days prior to closing.  For this violation, I have an attorney involved as this makes the seller responsible for all required repairs once the inspections take place (and there will be repairs - no duct work on heater).  Since this is the case, my realtor and I drafted up an addendum to extend closing in order to get this work completed once the seller pays for an inspection (again, required per the contract).  We are currently waiting on the seller to sign and agree to an extension.  It would be ridiculous of them to not sign it, but I was just wondering, what happens if they don't?  What happens at midnight tonight when the contract expires?   We briefly talked about it with my attorney but he suggested that we focus on getting the extension and we'll go from there.  He doesn't think they wouldn't sign it.  However, I'm just curious as to what would happen.  Does anyone have any experience with this and could shed some light?

Thanks in advance

Marc

@Benjamin Cooper

@Marc Izquierdo

Generally once a contract expires the agreement is no longer in-force, unless there are enuring terms/clauses in the agreement.  However, if you can demonstrate that Vendor's failure to perform - whether purposeful or not -  ran out the clock on the deal, you have the option of taking legal action to force the vendor to fulfil the agreement.   IMHO, you do not want to go there.

If there is extensive work required to the HVAC and electrical systems, the Vendor may have had a change of mind about the sale and want the deal to expire rather than do the work.

In this sort of situation, I prefer to gather my own quotes to have the work completed and negotiate a reduction in price or a hold-back to cover the work (once the work is complete any balance of funds would be released to the vendor).

A story that might be relevant on the negotiation end of things:

I was the grader for a large college math class. The professor handed back student assignments. One of the students came up to argue about his grade. The professor listened and said "I see your point, I'll give you 5 points back."  The student kept going. The professor said "Ok, 3 points."  The student paused in shock, and then shut up and took the 5 points.

This particular deal may look great to you, but remember, you are the one with the money to spend. There will be lots of other options. If the deal expires, you can either offer them a deal that is less attractive than the one they just passed up, or you can walk. Walking away from a bad situation is a win.

Good luck! I hope you will post how this turns out.

Thanks for all of your advice.  Fortunately we were able to get the seller to sign an addendum to extend the closing date out to December 15th.

Originally posted by @Marc Izquierdo :

Thanks for all of your advice.  Fortunately we were able to get the seller to sign an addendum to extend the closing date out to December 15th.

 But will they also address the issues by then?

@Roy N.

Yes, the seller obtained all of the required certifications and, as of yesterday, the inspector from the municipality came out to perform the final Use and Occupancy inspection.  In order to pass the inspection, all of the identified deficiencies need to be corrected.  As far as I know, he corrected them.  We are still waiting to hear the results of the inspection.  Once that is complete and confirmed to be satisfactory, we go to settlement. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here