The Buyer Missed Closing Date. Now What?
In real estate transactions, the closing day signals the final steps in transferring a property from seller to buyer. The closing date is when all paperwork is finalized, closing costs are paid, the title is transferred, the buyer receives the keys, and the seller is free from the property. The closing date is determined prior to signing the contract, based on conditions and contingencies. Many closing dates are set to 30-45 days after the contract is signed, but it’s not uncommon for buyers to request closing dates 60 days after signing. Read the contract carefully and ask your real estate agent to explain the penalties and processes if a buyer missed the closing date.
So what happens if the buyer missed the closing date?
There are several reasons a buyer may miss the closing date, most of which can be rectified with a simple extension. For example, of the buyer’s home mortgage loan is delayed, the closing date in the contract can be extended to allow for the loan to process. In these cases, the seller’s real estate agent can reach out to the lender to estimate a completion date and then adjust the closing date accordingly with an addendum to the contract. The buyer missing the closing date due to loan processing can be minimized or eliminated with buyers who have secured pre-approval. In cases where the buyer has not been pre-approved, several complications could arise that could delay closing, such as making amends to negative credit reports, or struggling to obtain significant down payments.
Another reason a buyer may miss the closing date is if their purchase was contingent on the sale of their current house. If the sale of their house is delayed or unlikely, the seller has the right to terminate the contract.
When the closing date was originally determined and the contract signed by both parties, that contract is binding. When the buyer misses the closing date, the seller has the right to terminate the contract and re-list the house for sale or contact other parties who had previously made offers on the property.
Terminating the contract is a radical move that doesn’t always benefit the seller. When a buyer’s loan is denied or other complications indicate problems not likely to be solved within reasonable time, the contract may be terminated. But there’s no guarantee for the seller that previous offers will still be valid, or that the home won’t be listed on the market for extended periods of time. Prior to terminating a contract due to a missed closing date, carefully consider all other options.
Although the buyer may have put up earnest money in advance, that money can be protected in the contract in favor of the buyer, meaning it may be difficult for the seller to cash in on the earnest money. But it is possible for the seller to charge the buyer a fee for each day beyond the closing date until the transaction is finalized.
Early occupancy is another option available to the buyer and seller if a closing date is delayed. Although the original contract for sale of the property is still in play and has extensions specified in writing, the seller may opt to “rent” the property to the buyer until completion of the sale. This is the best case scenario if the seller needs to vacate sooner than the extension date, or if the buyer sold their existing house to buy the house from the seller.
When a buyer misses the closing date, it’s usually not because they’ve changed their mind or decided to skip out on the deal. More likely, the buyer has run into unforeseen complications and is working earnestly to rectify any problems or expedite the processes. The seller must carefully consider the reasons for the delay and then determine if it’s in his or her best interest to terminate the contract, write in an extension, or charge the buyer appropriate fees for delays. The seller’s real estate agent plays a critical role in outlining their clients’ available options and advising which course of action is most beneficial. The most beneficial outcome is to agree to a short extension to secure completion of the transaction, creating a win/win for all parties involved.
This information is provided courtesy of The Eastside Real Estate Team. Keep us in mind for all your real estate needs. Call us today at 425-200-4093.