Profile picture for user7223479

When does a real estate sales contract actually end?

Our home was under contract for well over 70 days while we waited for the buyer to secure USDA RD financing. The original closing date came and went.  We granted a 5 day extension due to assurances that a final decision would be back any day.  Sure enough, the buyer did indeed get a decision from USDA--NOT APPROVED.  The extended closing date came and went and we prepared to move on to a new buyer.
Now my Realtor tells me that we need to get the original buyer to sign a release from the contract.  This makes no sense to me--why do contracts have expiration dates if you still need a release to get out after the expiration date?
Some additional facts that may assist with an answer--we live in the state of Ohio.  The contract included the "time is of the essence" terminology.
So--Is a release really required to get completely free and clear of these buyers?
  • March 31 2014 - US
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Answers (10)

If the buyer refuses to sign a release, it may be because they don't agree that the contract has expired - and we're not going to be able to adjudicate that here. The risk you run is that you enter into a contract with a new buyer, and the old buyer turns out to be correct, because then you will have contracted to sell the one property to two sets of buyers.

As your agent isn't certain enough about the contract expiration to move forward with a new buyer, I would push for the release.

All the best,

  • April 01 2014
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The contract has expired.   I would forge ahead.   Sounds like you were beyond reasonable and there really should have been some escrow money involved so the buyers would have a little motivation to get the deal done.    I also wonder who would let an un-approved buyer even see any house to begin with.
  • April 01 2014
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Profile picture for user7223479
Thanks to all for the advice.  I am hearing loud and clear that the advice of the contributors is to get a release.  As a layperson this still doesn't make much sense--why is there an expiration date if the potential buyer still has some sort of "dibs" even after the contract has expired? That said, I believe my agent is in the process of getting said release.
So what happens if the buyer refuses to sign a release?  He seems to be pinning his hopes on winning his appeal with USDA.  If that happens (and I have no better offers at the time) then that will be just fine with me.  But while he pursues his appeal I am losing selling days in the spring prime selling season in this area. I cannot keep holding onto a house and paying the bills just because this person "might" win an appeal.
As an aside, I implore any seller to avoid offers that involve USDA RD loans at all costs! I see other people agreeing to offers and closing on conventional loans in about a month.  Out situation has dragged on since mid January--It is now April!
  • April 01 2014
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Dan is correct. If you don't have a release, then you are at risk of having the buyers contest the termination of the contract. Sure, they'd be wrong, but do you want to have your next sale impeded by them?

A release is an acknowledgement that the contract is no longer in force. It is "really required" to get completely free and clear of "these buyers," otherwise, you may have to have a judge announce it.

All the best,
  • April 01 2014
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Your questions has been answered well by all.  I would just like to add that starting all over again could delay your house closing that much more.  I would suggest your listing agent contact the lender to get more details.  Perhaps it's just days away.  Yes, it is common for USDA loans to take longer and to possibly delay closing. When serving as a listing agent, I would not accept another offer without the termination of the first.  It could get fuzzy.  You don't want to subject yourself to that.  Think about it.  It's just a signature-not difficult or time consuming.  It's better to be safe than sorry.  Good luck!
  • March 31 2014
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Profile picture for Dan Tabit
It's a housekeeping matter that makes everything 100% clear to everyone involved.  As you've already been through one nightmare, it's best to avoid the potential for the next one.  That would be this buyer showing up at signing to disrupt your sale to a fully qualified buyer.  While this is rare, and could be worked out, the rescission solves it completely for all involved.   
  • March 31 2014
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Profile picture for Brad Aull
While it technically may not be required, it's best to cover yourself in this situation. Good luck to you!
  • March 31 2014
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Profile picture for wetdawgs
You would be safest to get the original buyer to sign a release.    Probably you would be okay without the release, but it has potential to become messy.   Your attorney may  be able to suggest a third option, such as mailing (with confirmation of receipt) a letter of cancellation due to failure to perform. 

It seems in the last few weeks, several people have posted in Zillow advice about buyers having issues with USDA loans.
  • March 31 2014
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Profile picture for user7223479
Thanks for the reply.  Sadly there is no earnest money at stake here--my agent advised that they would be able to get it back if the deal fell through due to financing so there was no point in demanding it.  One of many missteps we've made in my opinion. (The biggest being that we ever accepted an offer that involved USDA funding--this has been a total nightmare!).  Anyway, I wonder if this changes your stance on getting anything signed by the former buyer?  Guess I am still confused on why we'd need their written release when the contract has expired and there is no earnest money in escrow.  We are actively seeking other buyers at this time and I have bene told the property is shown as "active" in the MLS. 
  • March 31 2014
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Profile picture for Dan Tabit
If I were in your shoes, I would put the house back on the market with a caveat in the listing somewhere, "Subject to rescission".  This would get you back available while explaining there may be a glitch.  Simultaneously I'd be pursuing the buyer to get that signed and offer to still sell to them IF they came back with an approved loan.
 USDA financing takes a long time sometimes and all loans are being very carefully underwritten, so surprises like this are not uncommon.  The problem for this buyer is that they don't appear to have many other options.  Nationally, USDA and VA are the two main 0 down options.  Without knowing why they were declined, it's impossible to know if they have an issue they can solve quickly or will need to wait a while.
Hopefully you have some earnest money being held that they will want back and you can get your home back on the market and they can get some or all of their money back.  Best of luck.
  • March 31 2014
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