Home sale transactions address the issue of closing by setting a specific closing date in the purchase agreement, or by pinning it to a future, identifiable event, for example, 10 working days after the buyer receives satisfactory evidence of title. It's not unusual for a closing to be postponed, and it's not impossible for a closing to be postponed numerous times. Knowing why the delay is happening and what you can do about, is key to preserving your patience.
Once the parties sign a preliminary purchase agreement, they enter a period of escrow that cannot close until all the terms of the purchase contract are met. Purchase contracts are full of conditions, or contingencies, which the parties must satisfy before the deal can move towards closing. Contingencies give the buyer and his lender time to arrange financing, organize a home inspection and receive an appraisal at or above the sale price. They give the seller time to carry out any repair work identified by the home inspection report. The closing date specified in the purchase contract can be arbitrary, as it is often simply an estimate of how long it will take the parties to satisfy the various contingencies.
Reasons for Delay
Numerous people play a part in the home sale process. The buyer and the seller have obligations under the purchase contract, but they do not act alone. Title companies, mortgage lenders, attorneys, home inspectors, appraisers, the tax office and maintenance contractors -- as many as 20 different people have a job to do. With that many people involved, it's no wonder things get delayed. Perhaps the buyer is responding to last-minute lending requirements, or the title is cloudy, or the seller's lender fails to approve the settlement statement on a short sale. The property might even suffer a last minute disaster, such as storm damage, that must be repaired before settlement.
Consequences of Delay
The uncertainty regarding closing is expensive for both parties. Sellers will accrue additional mortgage interest, Homeowner's Association fees and aborted moving costs. They might even lose their earnest deposit on the house they are moving into if they do not receive their sales proceeds on time. Buyers, on the other hand, must find somewhere else to live if they cannot remain in their current home past the initial closing date.
Handling the Delay
Westcoe Realtors advise going along with the delay if it is less than a week, but for longer or multiple delays, the party who is not responsible for the delay (usually the seller) should review any available courses of action. Assuming the seller wants to close the deal, he could agree to postpone the closing date by a fair period and document the new date by attaching an addendum, to be signed by both parties, to the purchase agreement. The seller could also ask for compensation. Westcoe Realtors suggest that the buyer release a portion of his deposit money absolutely, such that the seller is entitled to keep it if the buyer fails to close on the new closing date. Alternatively, the buyer could pay a daily rate, or "per diem" amount, to compensate the seller for the additional costs incurred due to the postponed closing.
Jayne Thompson earned an LLB in Law and Business Administration from the University of Birmingham and an LLM in International Law from the University of East London. She practiced in various “big law” firms before launching a career as a commercial writer. Her work has appeared on numerous financial blogs including Wealth Soup and Synchrony. Find her at www.whiterosecopywriting.com.