When a Deadline in Your Purchase Agreement Really Matters.
A buyer and seller agree on a price, sign the purchase agreement, and begin working toward closing.
Then something happens. The lender needs three more days. An inspection response is late. A required document wasn't delivered on time.
Is the purchase agreement still valid? Can one party walk away? What happens to the earnest money?
The answer may depend on a short but important provision in the purchase agreement:
“Time is of the essence.”
What Does “Time Is of the Essence” Mean?
This language means the parties intend timely performance to be an essential part of their agreement.
In a Michigan real estate transaction, it can affect deadlines involving inspections, financing, earnest money, closing, and other contractual obligations.
But there's an important distinction:
Missing a deadline does not automatically cancel every purchase agreement or cause the buyer to lose their earnest money.
The consequences depend on the contract's exact wording, the particular obligation, and the circumstances.
Three Examples of Contract Wording
Not every purchase agreement handles deadlines the same way. Consider these three simplified examples.
"Closing shall occur on or before November 30, 2026."
What it means: The parties have agreed to a date. Stating a date alone does not necessarily make timely performance an essential condition for every purpose.
"Time is of the essence with respect to all deadlines stated in this Agreement."
What it means: The parties expressly emphasize timely performance. Missing a deadline may carry more serious contractual consequences.
"Time is of the essence. Any extension of a contractual deadline must be agreed to in writing and signed by Buyer and Seller."
What it means: The agreement emphasizes strict timing and establishes a written extension procedure. Questions involving waiver or other legal circumstances may still arise.
Educational examples only. These are not excerpts from a specific purchase agreement or recommended contract language.
The important lesson is that a closing date, a strict deadline provision, and a written extension requirement are not necessarily the same thing.
What Happens When Closing Is Delayed?
Imagine a buyer purchasing a $550,000 home.
The purchase agreement calls for closing on November 30. Two days before closing, the lender announces that final approval will take until December 3.
Does the buyer automatically receive three additional days?
No.
Does the seller automatically have the right to keep the earnest money?
Not necessarily.
Here's what the parties need to determine:
Closing deadline: Does the agreement make timely closing essential?
Financing contingency: Does it provide protection for this particular delay?
Default provisions: What happens if a party fails to perform?
Extension requirements: How must the parties agree to a new date?
Earnest money: What does the agreement say about its release if the transaction fails?
The practical solution is to address the problem before the deadline and negotiate a written extension when necessary.
Five Deadlines Worth Watching
A purchase agreement may contain several deadlines, not just the closing date.
Earnest money deposit: When the buyer must deliver the deposit.
Inspection period: When inspections, objections, or termination notices must be completed.
Financing commitment: When the buyer must satisfy mortgage requirements.
Appraisal contingency: When an appraisal issue must be resolved, if the agreement includes this protection.
Closing date: When the parties are expected to complete the transaction.
These deadlines may have different consequences. Read the provisions that explain what happens if one is missed.
For more information about these contract provisions, see my Purchase Agreement Basics guide.
Can a Deadline Be Extended?
Yes, if the parties agree.
However, a conversation between agents or a verbal understanding may not satisfy the purchase agreement's requirements.
A properly documented extension should:
Identify the specific deadline being changed.
State the new deadline clearly.
Address any related terms that also need to change.
Be signed or otherwise properly agreed to by the parties as required.
The best time to address a needed extension is before the original deadline expires.
Waiting until afterward can create uncertainty about the parties' contractual rights.
What Have Michigan Courts Said?
Michigan courts have examined disputes involving missed deadlines, strict contract language, and whether the parties' conduct changed their obligations.
In Lechner v. Schwartz (2021), the Michigan Court of Appeals considered a dispute involving a missed closing deadline, time being of the essence, and alleged waiver of contractual requirements.
The case illustrates an important point: Even when a contract contains strict deadline language, the parties' conduct and the full agreement can matter.
That does not mean a buyer or seller should expect extra time or assume a missed deadline will be excused.
For additional background, see Michigan REALTORS' Basic Contract Principles.
Before You Sign
A purchase agreement is more than the price and closing date. It establishes what each party must do and when.
Before signing:
Identify every important deadline.
Understand what must happen before each deadline.
Review how contractual notices must be delivered.
Know what happens if either party fails to perform.
Understand how extensions must be approved.
Keep copies of signed amendments.
A few words about timing can make a significant difference when something doesn't go according to plan.
This article provides general educational information, not legal advice. Contract language and individual circumstances determine the parties' rights and obligations. Consult a qualified Michigan real estate attorney for legal questions.