Some issues can cause a buyer to miss a closing date on a property. Regardless of the reason, when a buyer delays a closing date, in most cases, the seller can cancel the sale. With that said, canceling a deal that late in the game is not always in the seller's best interest. There are several alternatives available that will benefit both the buyer and the seller.
Tip: If a buyer misses the closing date and the seller has a lucrative backup offer, there is less chance that the seller will be willing to grant an extension.
Evaluate the Reasons. For a buyer whose financing is almost complete, and it is just a matter of signing a few documents, the seller might be inclined to offer an extension, since starting over, relisting the house, finding a buyer, and hoping that buyer can get financing, can be an expensive proposition. However, if the financing fell through completely and the buyer is trying to obtain another loan approval, there is a chance that other lenders will find the same reasons to decline the loan, and the process could take a while. The seller might be better off cutting losses and starting with a new buyer.
If the sale was contingent upon the buyer's house selling, but the buyer still has no offers, the seller may be looking at a long delay. A buyer who has sold the house and the closing date is imminent, however, is a much better risk for the seller to offer alternatives.
Seek Out Alternatives. A closing date listed in a sales contract is legally binding. In most cases, if the buyer is not ready to close by that date, the seller can cancel the sale. Some alternatives to canceling the contract can benefit both the buyer and the seller.
- Extension: The seller can offer an extension of time to the buyer. By setting a new closing date, the buyer has that amount of time to take care of circ*mstances delaying the close. Although the seller can offer an extension for free, he or she is also allowed to ask for a fee per day for the inconvenience of waiting. The buyer can agree to the fees, or let the deal cancel – which, depending on how the original sales contract reads, could mean losing earnest money and other expenses already paid.
- Early occupancy: If the seller already moved out, or is ready to move out, he/she can offer to rent the house to the buyer. A contract would be drawn up, whereas the buyer would have a set amount of time to complete the closing, and until then would move into the home and pay rent to the seller.
Give Them Notice. In California, when a buyer doesn’t honor timelines set out in the sale contract – including the closing date – the seller can issue a Notice to Perform to the buyer within 48 hours before the deadline. A Notice to Perform gives the buyer 48 hours to take care of listed issues before the contract will be canceled. In other words, if close of escrow looks shaky and the seller is anxious to take a backup offer, the Notice to Perform could get issued 48 hours before escrow is set to close. If the buyer can't come through, the seller could cancel and accept the backup offer. This material is not intended to be relied upon as a statement of the law, and is not to be construed as legal, tax or investment advice. You are encouraged to consult your legal, tax or investment professional for specific advice. The material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy.
Adapted from an article on homeguides.sfgate.com by, Candace Webb.
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