Purchases and sales of real estate are some of the most complicated contractual agreements that most people and businesses will experience. Buying or selling a house or commercial property involves multiple stages of agreements, culminating with a closing.
However, there are a variety of factors that could lead to one of the parties not being ready to close on the specified closing date. In these cases, you can still preserve the agreement by taking careful and measured contractual steps. Otherwise, handling the matter could become quite tricky.
With any contractual dealings as important as these, we urge you to get experienced help from the dedicated Maryland real estate lawyers at the Heyman Law Firm. To get helpful advice through a free initial case evaluation, call our offices today at (410) 305-9287.
Reasons Why a Real Estate Purchase Contract Might Expire in Maryland
When a prospective buyer submits a bid on a listing, they may include any number of contingencies to the deal. These contingencies work to negate their offer in the event of certain complications to the deal.
One of the most common contingencies in real estate deals is an inspection contingency. Buyers who are looking to submit a bid on a listing early on may want to get an inspection of the premises from an independent source. The inspection may turn over certain issues that are so serious that they warrant a change in the deal itself. If there is an inspection contingency, there will be a specified period of time (usually 7-10 days) allowed for inspection that occurs prior to closing. Under Maryland law, inspection contingencies may give the right to the buyer to terminate the agreement.
Depending on the property in question, there are several areas that a buyer may want an inspection to cover, including structural soundness, mold, septic, water quality, chimney, and, most troublesome, stucco. Stucco that has been penetrated by moisture can cost tens or hundreds of thousands of dollars to repair and may commonly result in the termination of a purchase agreement.
Another contingency that is used often in Maryland real estate purchases is the mortgage contingency. For most home buyers in Maryland, financing the purchase is the only way that buying the property is possible. But buyers may not know for sure whether they can secure financing for the purchase until after they have submitted an offer.
Therefore, Maryland law allows for buyers to include financial addendums in their offers if they are applying for a mortgage. By using a financial addendum, a prospective buyer does not have to worry about the burden that the purchase contract causes if they cannot obtain the financing they will need to fulfill their end of the deal.
Sometimes, however, financing issues cause the deal to run past closing even when securing the financing isn’t the issue. Buyers may run into time issues when securing financing from out-of-state creditors that aren’t familiar with the real estate market or agents in the area.
Does a Real Estate Purchase Contract Still Exist if the Parties Don’t Close in Time?
When a real estate seller accepts a buyer’s offer on a property listing, a closing date will be set. If the parties do not officially close on the date specified, there is technically no contract. This may complicate matters if there are already funds in escrow, and you will want the help of a seasoned Maryland real estate attorney if you find yourself on either side of this situation.
What to Do if Your Real Estate Purchase Contract is Going to Expire in Maryland?
If there are anticipated issues that cause delays in closing, but both parties are still determined to make the deal happen, you may contractually extend the closing date. The easiest and most direct remedy when a buyer is not able to close escrow on the contracted date is to get an extension of escrow addendum signed by both buyer and seller.
Prior to doing this, it is important to understand why there is a delay and the timeframe needed to remedy the issue and close escrow. Be realistic with the time needed to close. Sellers are less likely to be gracious if multiple extensions are requested. While an extension seems easy enough, the seller may not be inclined to cooperate and extend. When working to persuade a seller to agree to the extension, it is important to have a clear explanation for the delay.
In addition to an explanation and reasonable extension request, one strategy that tends to work well is for the buyer to offer to release the earnest money deposit immediately to the seller prior to close of escrow. This strategy should only be used if the buyer is certain that they can in fact close escrow. When a buyer releases the earnest money deposit, it is in effect a way for the buyer to instill confidence that the buyer is sincere about closing and help to remove the skepticism from the seller’s mind. There is no greater show of intent to close than to release the earnest money as non-refundable to the seller.
Delays are not ideal, but the reality is that they do happen and more often than not in a real estate transaction, they are due to no fault of the buyer and seller. The best approach is to keep clear and continuous communication with all involved parties of the transaction. Communication is key to avoid raising doubts and keep the transaction moving forward.
Talk to the Maryland Real Estate Attorneys at the Heyman Law Firm for Free Today
To get critical and helpful advice on your situation, reach out to the dedicated Maryland real estate lawyers at the Heyman Law Firm today to get a free initial case evaluation. Call (410) 305-9287 to learn more.