How to Avoid Problems with Section C7 of the Hawaii Sales Contract, i.e., "Extension of Closing Date"

Paragraph C-7:  Extensions.

    It is vitally important that agents read this particular paragraph very carefully, and ensure that their clients understand the content & meaning of this paragraph (section C7 of the Hawaii Sales Contract - Deposit, Receipt, Offer, and Acceptance - aka "DROA").

    The original intent of this paragraph was to allow Buyer clients the opportunity to extend the closing date, in the event that the Buyer’s loan funding was delayed for reasons beyond their control. This right of extension was also extended to the Seller. This provision is in the contract to protect both Buyer and Seller so that, in the event that either party are not able to complete the transaction by the scheduled closing date, due to reasons beyond their control, then the affected party can extend the closing date without cancelling the transaction. 

   The problem – and sometimes abuse – occurs when one party extends not for reasons “beyond their control”, but because it may be “inconvenient”* for the client to perform on or before the contract closing date.  Therefore, make sure the Buyer is aware (especially if they’ve given their landlord notice and have nowhere to live after the anticipated closing date!) that the Seller can extend out the closing date up to the number of days specified in paragraph C7. 

    The same goes for your Seller clients - make sure that they’re aware that if they are doing a “back-to-back” closing, or a 1031 Exchange, for example, the transaction could come to a screeching halt if the Buyer exercises their extension rights.

*Who will decide whether the party extended for legitimate reasons “beyond their control” or for mere convenience?  The judge in the ensuing lawsuit will! That is not the person you want to invite into your client’s transaction.

I hope this has helped clarify your understanding of this often misunderstood/misinterpreted section of the Hawaii DROA.

Until next time – Take Good Care!

Jay J. Spadinger, REALTOR, BIC, ABR
Hawaii State Educator
Rainbow Properties
Akahi Real Estate Network, LLC
www.rainbowproperties.com
www.jayhawaii.com