If the seller will agree to give you another 30 days to close... go for it, but some sellers will put in writing that if you don't close with in the extended 30 days that you will forfeit your earnest money. CAUTION!
I would assume you have a buyer agent representing you. If you don't like what he or she is advising then you should contact an attorney asap!!
It has always been my impression that 559.21 deals with the seller giving clear title to the buyer, and they have 30 days to do this if necessary. Maybe it is more about statutory cancellation, because there is a process that goes on if one of the parties refuses to sign the cancellation of PA.
However I do not believe that if the seller sends you a cancellation, and you refuse, that you get days to close with no repercussions. You are essentially on default of the PA by not closing on the due date. Once again I could be completely wrong, but I believe you are in default.
I also agree with Cameron that you your lender/bank should be having a discussion with you on the financing end. If they don't believe you can close it is best not to risk your earnest money. The seller is essentially asking for a written statement if I understand you, so besides the appraisal if you don't close the next time he retains the earnest money.
I can honestly say that since I have not personally had to deal with this a attorney may be the only person that can answer your questions 100%. I can only tell you that from a practical standpoint we always ask for an extension and get it signed, and although rare if you do not close on time the seller can choose to cancel the contract.
If it helps from a negotiation standpoint most of the time sellers are just as motivated to close as you are. There is no guarantees how long it will take them to find another buyer, get them to pay the same price as you, and close on time. It could take month's for the seller to do this, so it is almost always in their best interests to extend.
Therefore I would ask for an extension without changing any of the terms. without legal advice I believe that is the best strategy.
Whew, I feel better having gotten that off of my chest. MN Statute I believe deals with the process commonly referred to as a statutory cancellation. Chances are less than likely that the seller will initiate this process unless you become unresponsive. Traditionally if a buyer or seller wants out of a purchase agreement they will sign and send to the other party a voluntary cancellation form.
1. You are considered to be in default (or breach) of the contract at this point if what you describe is accurate. Your failure to close on time meant that one of the parties did not live up to their end of the bargain therefore breaching the terms of the contract.
2. It is always better to execute and extension unless you feel you would like to have the option to cancel at any time. However, reserving that right yourself, you leave that option open for the seller. I don't blame the seller for wanting extra earnest money but the choice you will need to make is whether or not you like the property that much.
Call an attorney, the nuances of these contracts rarely come out completely here and thus your are left giving partial information leaving you with only partially accurate responses.
Keller Williams Premier Realty