Once a buyer and seller have agreed on the price for a house, they sign a purchase contract that outlines the terms of the deal and includes a closing date. Setting a specific date is intended to motivate all parties involved in the transaction to work expeditiously to fulfill their duties. Sometimes, however, things don’t go according to plan and the closing is delayed.
Reasons Why the Closing May Be Delayed
A real estate deal may not be able to close on the anticipated date for a variety of reasons. Sometimes the buyer is unable to get approved for a mortgage. Even if the buyer was pre-approved, a recent increase in debt could’ve made the person’s debt-to-income ratio too high and caused the lender to rescind the mortgage offer or change the terms. The buyer may also be unable to get a mortgage because the house was appraised for less than the sale price. The home inspection also could’ve uncovered serious problems that need to be fixed prior to closing, such as roof leaks or mold.
What Happens If You Can’t Close on Time
The purchase agreement should specify what’ll happen if the closing is delayed. If one party is clearly responsible for failing to meet the target date, that party will have to pay financial penalties. The contract may specify a variety of penalties for different scenarios. The penalties may be flat fees or may be calculated in other ways.
If the buyer is unable to close on time, he or she may be required to pay the seller’s mortgage on a prorated basis until closing. If the seller is responsible for the delay, he or she may have to pay for the buyer’s unanticipated living costs until closing.
A lender may refuse to approve a mortgage for more than the appraised value of a house. If the house was appraised for less than the agreed-upon sale price, the parties may have to renegotiate the price.
If the closing is delayed because the inspector found serious problems, the parties will have to decide how to proceed. The seller may be willing to make repairs before closing. If the buyer can’t wait to move in, the seller may be willing to lower the purchase price to account for the cost of repairs. If the problems are major, the buyer may decide to cancel the deal.
Discuss Potential Delays With Your Real Estate Agent
If you have any reason to think that you might miss your closing date, talk to your real estate agent. He or she might be able to help you find a solution or work with the other party to make modifications or concessions so you can proceed as close to schedule as possible.