You ask a very important question. Unfortunately this situation is a common occurrence. I will attempt to guide you through this. Now understand that there is so much information you did not share when you wrote your question. For instance, I donâ€™t have your contract in front of me. I also donâ€™t know what kind of contract you have: One that is a standard real estate purchase agreement, whether itâ€™s one written by seller, or you; whether either of you are represented by a Realtor, whether you are buying from a For Sale by Owner (FSBO). There are many variables, it gets complicated, but based on what you shared I would say that the first buyer may be the primary buyer. However, I see opportunity for you to enforce your contract with seller depending on the results of further investigation.
When the seller contracted with buyer 1, they essentially agreed to exchange the property. Assuming they have a valid contract, they are free to modify it as long as all parties subject to the contract mutually agree. When the seller signed a contract with you, buyer 2, subject to the release from the contract signed with buyer 1, you and seller understood that a release was required from buyer 1 in order for seller to sell the property to you--actually a mutual release.
This is called a condition. A condition is a fact, the occurrence or nonoccurrence of which determines when and if a party must perform. If a condition occurs, it triggers an event. If a condition does not occur, the event is not triggered. So, you both had mutual assent, meaning both seller and you understood and agreed, to whatever terms were included in your contract. Also, included in your contract was an agreement that your contract would not be valid unless buyer 1 released seller from the contract. This is called a condition precedent, meaning that a condition must occur first.
Here, you wrote that seller and buyer 1 signed an extension of their contract, though after the closing date had passed. This means their contract, if valid to begin with, is still in effect and the condition precedent --mutual release--did not occur which would trigger the sellerâ€™s duty to sell the property to you, so the seller does not have to perform their contract with you. However, you may still have rights and remedies you can pursue.
Paul, buying a home is stressful enough without having to deal with a problem like this. There are many emotions one goes through, joy, anticipation, fear, etc. If you still want the property, I would advise you to speak with an attorney to see what remedies may be available to you. Some attorneys offer free initial consultations. Also, if you need a Realtor to represent you, I will be happy to guide you through this difficult situation. I have attorney contacts and other real estate related professionals available to assist. Feel free to contact me if you need or want assistance in this matter.
Elvin Carroll 616-250-0723