You have your buyer and you have a fully executed contract … your game of chess has just begun. The unpredictability of the commercial and real estate markets has caused an uptick in real estate litigation from buyers and sellers trying to back out of closings. As with many things, the more work you do at the beginning of the deal—drafting the strongest contract possible—the easier it be will be to get to that closing. Let’s explore various options on how to dissuade a recalcitrant buyer and what to do if a deal falls apart.
Cut out as much legalese as possible. A contract is no different from all legal writing. It will be read and interpreted by a human, so it should be written for one. There are obvious yet crucial elements that should be included: the closing date, whether there is a limit to the number of extensions, the length of the extensions, and what the ramifications are for each. For example, an extension may call for a deposit to go “hard” (non-refundable) or require additional deposit money as each extension is exercised. The agreement should stipulate that the deposit be held in escrow and provided to the seller if the buyer walks away. Since the extension is a key tool used by sellers to make it more difficult for buyers to pull out, it should also be a mechanism that, prior to closing, should direct as much money as possible to the seller’s side of the table.
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