What are the consequences if you miss the closing date?

The mortgage application process can be time-consuming and frequently prone to delays due to a variety of reasons. However, as the closing date approaches, there is a sense of relief and eager anticipation.

The buyer, seller, and their real estate agents will meet, sign the purchase contract and other necessary paperwork to complete the home sale.

Typically, buyers have 30 to 45 days until the closing date. Buyers will undergo an inspection and finalize financing with their lender during this period.

When you miss a closing date, you may suffer a penalty from the vendor as a result of the delay. Many real estate deals have last-minute closing delays due to unforeseen circumstances. When the seller delays the closing of the house, it can be highly frustrating.

Reason behind the delayed closings

• Financial concerns often cause a delayed closing. Even qualified buyers who have been pre-approved for a mortgage can run into problems.
• Unexpected problems could surface on credit records. You can face a sudden change in your financial circumstances. Any uncertain event can arise between the seller’s acceptance of an offer and the closing date, damaging a buyer’s finances. For example, you can lose your job, or divorce proceedings may be initiated.
• Other economic factors, such as a dramatic rise in interest rates, can make qualifying for a home challenge.
• The seller may be willing to provide an extension to a buyer whose financing is nearly complete and only requires the signing of a few paperwork. Re-listing the home, finding a buyer, and hoping to get financing may be a costly endeavor.
• If the funding falls through, though, there’s a good chance that other lenders will take a long time to get back on their feet, only to reject the loan for the same reasons. The seller would cut his or her losses and start over with a new customer.
• Insurance concerns might also lead to unpleasant surprises. If the home is in a high-risk location, the lender may require the buyer to purchase additional insurance. Lenders may even decine a borrower if the property has been judged uninsurable due to previous claims at the address. This can cause the closing to be delayed.

Get A Rate Quote

 

The consequences of missing your closing date

1. You might have to pay a per diem fee. Once the closing date has passed, the seller may choose to extend the deadline and charge you a per diem, or daily rate. It helps compensate for the inconvenience, covering additional mortgage, tax, and insurance payments that the seller will incur due to the postponed date. The per diem rate is usually one-third of the seller’s housing costs. This penalty shouldn’t put you in a lot of debt, but the added financial strain can make the new closing deadline a lot more complicated.
2. The seller can dismiss the transaction. Unfortunately, the seller may decide to cancel the transaction entirely. Walking away from a transaction isn’t usually in the seller’s best interests because they’d have to start the selling process all over again. They may opt out if they believe they can get a higher offer, the discussions have become acrimonious, or they’re upset by the wait. The seller, however, may not be able to lawfully terminate the sale based on the contract. 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.
3. Sellers have the right to sue for damages Even if the reason you missed the closing date was unintentional and out of your control, the seller may pursue legal action because you are technically in breach of contract. The seller can ask the court for compensation for quantifiable monetary damages, such as the costs of continuing to pay a mortgage, taxes, and insurance, or continuing to rent a storage container to store their staging furniture. In the most severe instance, the seller can sue you, asking the courts to require you to buy their house regardless of whether your financing fell through or whether you, the buyer, want out.
4. Your Earnest Money Deposit Will Be Forfeited Your earnest money deposit, or good faith money, indicating that you have the cash to purchase the home, will be returned to the seller as compensation for the hassle. Unlike in the past, where the earnest money deposit would be refunded to you at closing and placed toward the down payment or closing costs, your earnest money deposit will be non-refundable in this circumstance.

What can a seller do to avoid closing delay?

Look for alternatives.

In all cases, a legally binding closing date is specified in a sales contract.

In most circumstances, the seller can cancel the deal if the buyer is not ready to close by that date. Some contract cancellation possibilities can benefit both the buyer and the seller.

Look for extension

The seller may provide the buyer with an extension of time.

By rescheduling the closing date, the buyer gains that time to address any issues that may have caused the closing to be delayed.

Although the vendor may give a free extension, they may also charge a daily fee for the inconvenience of waiting.

For a Smooth Closing, Here Are Some Suggestions

You want to keep any surprises to a minimum on closing day—after all, you’re almost done, and you don’t want to prolong the process.

Ensure that all contingencies have been addressed before obtaining final mortgage approval.

Examine your final statement.

Conduct a last walkthrough.

Bring all the necessary paperwork to closing.

If the seller has moved out or is getting ready to move out, he or she can rent the house to the buyer. You can consult with an attorney for help. You should draw up a contract, and the buyer would have a certain length of time to complete the closure before moving in and paying the seller’s rent.

You May Also Like: