One option you will most likely have when it comes to dealing with a seller's closing delays is to just allow the seller more time by executing a written addendum to the contract that delays the closing with a new date.
If the contract doesn't include a “time is of the essence” clause, a delay in closing doesn't automatically give you the right to cancel the deal. Instead, both parties usually negotiate a new closing date.
When the closing is delayed, it might force sellers to make last-minute adjustments to their plans. Adding to the financial strain, closing delays mean the seller continues to incur holding costs on the property. This includes ongoing mortgage payments, property taxes, and maintenance expenses.
“If all of the buyer's legitimate deadlines have expired and the buyer is considered to be in default of the contract, the seller can elect to keep the earnest money as liquidated damages and agree to cancel the contract,” says Horner. “Or, the seller can elect to sue.”
When a buyer cannot or does not complete an agreement without cause the buyer will be responsible for making the seller “whole”. This means that the seller is entitled to be put in the same position as the seller would have been had the buyer completed the transaction as scheduled.
One action you can take is relatively simple: grant the buyer an extension, no strings attached. Your real estate agent can negotiate a new closing date that generally will add an additional 10 to 30 days to the closing date, giving the buyer more time to tie up their loose ends.
Loan Closings
If the buyer cannot attend closing, we generally have two options: a power of attorney or a remote closing. Both of these options get the job done, but they are handled very differently. We discuss these options in detail with the buyer and most often the buyer gets to choose how to close.
A mortgage contingency usually provides 30 to 60 days for buyers to secure loan approvals — which means that if buyers don't obtain financing within that period, they risk losing their earnest money deposits, and sellers are legally allowed to cancel the contract.
How long it takes to close on a house depends on many variables, including when you can schedule appraisals and inspections and when the lender finishes the underwriting process. Even if you pay cash for a property, there is still a closing process.
If the seller does not vacate on the appointed date, or leaves the home damaged in some way, then the money held in escrow can be given to the buyer as a penalty or to fix the property. Unfortunately, you've lost your leverage. You've paid the money and the seller hasn't moved.
If the lender doesn't approve your loan by the closing date, then the purchase contract may expire. The seller might agree to push back the closing date to allow you more time to get your loan, but they don't have to. If your loan is not approved, the sale will fall through completely.
Regardless of whether it's closed or not they still have no legal basis to back out. “The buyers on the house I'm selling backed out” does not give them the right to back out of their contract when there was no contingency on their house being sold.
And in many cases, a home seller who reneges on a purchase contract can be sued for breach of contract. A judge could order the seller to sign over a deed and complete the sale anyway. “The buyer could sue for damages, but usually, they sue for the property,” Schorr says.
A closing date extension addendum is an agreement between the buyer and seller of a property to extend the closing date of their purchase agreement. Once executed by all parties, the addendum is attached to the original purchase contract to include the new date on which the ownership will be transferred.
If the buyer defaults, the seller can repossess the property, as outlined in the finance agreement. This method benefits both parties by providing flexible terms and potentially faster transactions.
If the buyer absolutely cannot come up with the cash to close, they may lose their deposit and the seller can put the home back on the market. Having insufficient funds at closing could cause the buyer to default on the purchase agreement.
If you have a good reason for missing the closing date, the courts will usually decide in your favor and grant a reasonable postponement, giving the buyer an extra 30 days to complete the transaction.
Yes, though whether it will cost you depends on the terms of the contract you sign. If you cancel the deal because one of the contingencies outlined in the purchase and sale agreement hasn't been met, you usually can walk away without having to pay penalties.
A closing on a home can be delayed for many reasons, including a lower-than-expected assessment, problems found at the time of the inspection, or if there is an issue with your mortgage loan.
To avoid any financing roadblocks or a delayed closing, ensure that there are no major changes with your financial situation from the time you've submitted your loan application to the day of closing, such as buying a new car. With that said, it's recommended to work with a knowledgeable, local mortgage broker.
Even the best realtor is guessing at the amount of time needed to complete the pre-closing activities, and sometimes the realtor will set these dates to accommodate either the buyer or the seller. But ultimately, the bank determines when the property is ready to close.
Some buyers may be able to negotiate an immediate possession date. This means as soon as the transaction is closed and the deed is recorded, the buyer can move in. A few other common buyer possession dates may be 15 days, 30 days, 60 days, or even 90 days after closing, depending on how much time the seller needs.