Many issues can cause a buyer to miss a closing date on a property. Regardless of the reason, when a buyer delays a closing date, the seller can cancel the sale in most cases, and will likely do so, especially if there is a lucrative back-up offer. 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.

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, re-listing 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.

Another long delay for the seller might occur if the sale is contingent upon the buyer’s house selling, and the buyer has no offers after a significant amount of time. A buyer who has sold a house and has an imminent closing date, however, is worth waiting for.

Seek Out Alternatives

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 circumstances 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, wherein 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 back-up offer, the Notice to Perform could be issued 48 hours before escrow is set to close. If the buyer can’t come through, the seller could cancel and accept the back-up 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. Intended for distribution to only one per individual for marketing purposes only on behalf of our company. Not for reproduction.