When the buyer cannot close escrow on time, it can cause a myriad of problems. The primary problem is that purchase contracts contain an acceptance date in conjunction with a closing date. If the closing date is missed, at a minimum, the purchase contract will expire. If the purchase contract expires, the parties are no longer engaged in an active contract with each other. The typical action is to extend the closing date, but the sellers might not agree.
Many home sellers become upset when a home buyer cannot close on time. The agreed upon closing date is probably circled on a wall calendar, with an alarm set on their phone. In fact, the sellers might even make other financial commitments in anticipation of this closing date, such as the contingency purchase of a new home. They are counting on closing on that date.
It can be very frustrating when a real estate closing is delayed, however, being aware of the above reasons a closing is delayed can help reduce the shock, should it happen to you. Also, it can help you by knowing what your real estate agent and other professionals involved in the transaction should be doing.
The Escrow Closing Process
- Fully executed purchase agreement and addendums
- Deposit of earnest money deposit
- Home inspection or waiver
- Fulfillment of seller obligations such as submission of pest inspection report and/or completion, roof certification, home warranty, preliminary title policy, beneficiary demand receipt, and repairs, if any, according to the Request for Repairs
- Completion of buyer inspections, including release of contingencies, if demanded
- Buyer’s final walk-through inspection or waiver of the walk-through
- Appraisal of the property by lender’s appraiser
- Lender’s loan approval and satisfaction of loan conditions by buyer
- Seller’s and buyer’s signed escrow instructions
- Seller’s signed and notarized deed conveying title
- Buyer’s signed and notarized deed of trust and executed promissory note
- Buyer’s signatures on all loan documents
- Deposit of buyer’s funds from lender
- Deposit of balance of buyer’s down payment and buyer’s closing costs
Reasons for an Extension to Close
The reasons for delaying the close of escrow can be varied, but plentiful. Unexpected causes such as low appraisals, lender issues, or even a divorce can make an extended closing date necessary. Many times, the delays are due to poor communication between the lender and closing agent or Title Company.
In addition, borrowers face extreme scrutiny to obtain a home loan. Not to mention, sometimes things from their past that they thought were buried—like short sales, foreclosures, and personal judgments recorded in other states—have a way of popping back up. The reason for the delay much of the time can be traced directly to the lender. This can cause disappointment during the home buying process.
However, getting an extension on the closing of escrow can be a straightforward task, as long as it is agreed upon by both buyer and seller. When a buyer cannot close on time, the seller generally asks them to sign an extension of time addendum, and figures out why they need additional time.
Persuading a Seller to Sign an Extension
When a buyer cannot close on time, a strategy that works well is to offer to release the buyer’s earnest money deposit to the seller before closing. This presumes, of course, that the buyer is certain they can close escrow. Releasing the deposit to the seller is akin to putting your money where your mouth is. It instills confidence that the buyer is serious about closing, and it also removes doubt from the seller’s mind. With money in hand, that earnest money becomes nonrefundable.
You will typically need an escrow officer to prepare the instructions to release the earnest money deposit. The document will lay out the possibility that the escrow might never close and, if it does not, the buyer will not get a refund. Earnest money deposits are generally 1–3% of a home’s sale price.
Tips to For a Smooth Closing
You want to minimize any surprises on closing day, after all, you’re almost to the finish line, and you don’t want to delay the process any longer.
- Make sure all contingencies are taken care of
- Obtain final mortgage approval
- Examine your closing disclosure
- Perform a final walk-through
- Bring all the required documentation for closing
Every circumstance is different and should be considered clearly and carefully with the buyer’s agent and lawyer. When choosing an escrow company there can be many important factors to evaluate. Fees, location, staff and even recommendations from friends and colleagues are all things to consider. With Citrus Heritage Escrow by your side, you can rest assured that when you receive your settlement check, you’ve gained the maximum benefit from your home sale or purchase.
Call us today with any questions or concerns. Our professional Escrow Agents will help you through this exciting yet confusing process. (951) 335-7200