A salesperson drafts an Agreement of Purchase and Sale with a specific closing date. Due to unforeseen circumstances related to securing a new mortgage commitment, the buyer requests a 7-day extension to the closing date. The seller, having made arrangements based on the original date, refuses the extension. The buyer is unable to close on the original date. What is the most appropriate action for the seller to take?

Question: A salesperson drafts an Agreement of Purchase and Sale with a specific closing date. Due to unforeseen circumstances related to securing a new mortgage commitment, the buyer requests a 7-day extension to the closing date. The seller, having made arrangements based on the original date, refuses the extension. The buyer is unable to close on the original date. What is the most appropriate action for the seller to take?

Answer options: ✅ The seller should declare the buyer in default and retain the deposit, as the buyer failed to close on the stipulated date.

• The seller must grant a reasonable extension, as time is not generally 'of the essence' in real estate contracts unless explicitly stated.
• The seller can only retain a portion of the deposit, corresponding to any damages incurred due to the delay.
• The seller must offer to extend the closing date, but can demand compensation for the inconvenience.

Correct answer: The seller should declare the buyer in default and retain the deposit, as the buyer failed to close on the stipulated date.

Explanation: In real estate agreements, time is generally considered 'of the essence' unless specifically waived or altered. This means that closing dates are critical terms, and failure to close on the agreed-upon date constitutes a breach of contract by the defaulting party. Therefore, the seller is usually entitled to declare the buyer in default and retain the deposit as liquidated damages.