Failure by one of the parties to perform on the closing date will constitute a material breach of the contract and may result in the forfeiture of the down payment.
It's a prudent move to examine your loan agreement and purchase contract to determine whether provisions for extensions are in place. In most cases, many purchase contracts allow for a one-time extension of the closing date, offering flexibility to adapt to unforeseen circumstances.
“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.
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.
You can back out of buying a house any time before closing. However, you'll likely face penalties — including possibly being sued — if the purchase agreement has already been signed and you're backing out for a reason that isn't listed as a contingency in the purchase agreement.
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.
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.
Can you sue a loan officer if a deal fails to close on time and the seller refuses an extension? You can, but whether a judge would even hear your case is another matter.
If the contract specifies that certain home repairs must be done and the work is not completed, whether at the fault of the seller or the contractor they engaged, the sale might need to be postponed. They may ask to extend the closing date to complete the work. Difficulty financing the next property.
More often than not, purchase contracts will state that the sale will close on or before a specific date unless both parties mutually agree to a change, but some contracts don't allow the buyer or seller to change the closing date.
Compensation for delayed closings is usually based on actual losses or damages sustained by the aggrieved person in the event of a delay. The damages could be: Additional living expenses like hotel re,nt or storage costs. Other mortgage or interest payments.
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.
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.
The closing date is set after your mortgage loan has been approved and you accept the commitment letter. Your agent will coordinate this date with you, the seller, your lender, and the closing agent.
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.
The buyer receives the property title after fulfilling the agreed terms. 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.
When you miss a closing date as a buyer, technically you are in breach of contract and the seller could take legal action against you including your being mandated to reimburse them for mortgage, taxes, insurance, or other costs they may have incurred because of the delayed closing.
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.
A closing may fall through for many reasons, including title-insurance surprises, buyer financing rejections, inspection failures, and lowball appraisals. Even buyer's remorse can sour a deal.
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.
Can My Security Deposit Be Returned If My Mortgage Is Denied At Closing? If you have a contingency in place that includes an offer and purchase contract, you may be able to get your earnest money back. However, if you don't have it, you could lose it.
Most purchase agreements include contingencies for the buyer for backing out of the agreement. For example, a seller may say they want to keep the earnest money deposit if the buyer backs out. The seller can also sue for damages or lost money.