Contract talks on the possible sale of the Baltimore Orioles to former Treasury Secretary William E. Simon are "grinding along," a knowledgable source said yesterday.

"They've been under way for so long," the source said. "They're grinding along now and if I had to speculate, I'd said it (a sale) probably will go through."

Although there is no specific timetable for reaching any agreement, the source continued, "I would think that they would want to consummate it before spring training begins."

The Oriole pitchers and catchers report to Miami Feb. 22 and the rest of the team on the 28th.

Simon reportedly would like to move ahead on the negotiations to buy the franchise for $12 million from principal owner Jerold C. Hoffberger, who has returned from a week-long visit to Israel.

Hoffberger found Simon's initial contract proposal unacceptable, but noted the draft was the first step in negotiations.

"I think Jerry feels he has an obligation to allow the local (Baltimore) people to purchase the club first if they can," the source said, referring to a group of businessmen trying to raise $12 million to buy and keep the club in Baltimore.

That group's hopes were dampened Tuesday when two Detroit businessmen announced they would not invest in the club. The Baltimore group had hope that the two men would put up $6 million.

But industrialist Max Fisher and shopping center developer Alfred Taubman said they thought the Orioles would be a poor investment.

"We have looked over the investment potential of the Baltimore Orioles and have concluded that the acquisition of the ball club would not fit into our investment strategy at this time," their statement said.

"We can appreciate the concern that Baltimore area residents have expressed for retaining the club in Baltimore," it continued. "We hope the Orioles' management will be able to conclude arrangements to keep the team there."

Simon has not said he would move the club to Washington, but the Baltimore group and others fear that is what would happen in 1980 or later. Simon has indicated a willingness to play some games in Washington.

Members of the Baltimore group were unavailable for comment yesterday.They are reportedly seeking a meeting with Hoffberger now that the Detroit men are out of the picture and each day the prospect of state aid appears bleaker.

Maryland Gov. Harry R. Hughes has said he would be willing to explore the possibility of state aid to assist the group in purchasing the club. But Hughes said yesterday that he wanted to know more details about the requested aid and suggested that $6 million was too high. There also is growing opposition to the proposed aid from General Assembly members.