Do you charge buyers to extend the closing date due to lender delays?

Something not being mentioned here is that the closing date may not be entirely 'in stone'. Before a Seller refuses to close after a closing date is missed...and I mean that Buyer IS then ready...and ONLY for a scant few days...Seller better either get counsel ASAP or go ahead and close. Even though the contract's closing paragraph says that failure by either party to timely close triggers remedies set forth in the contract, this provision fails to include "time is of the essence" like the option and financing approval provisions. I believe I recall attorneys saying that that omission is for a reason: it happens too often, innocently, to have a death knell effect AND that a Buyer that's been doing all it can to get to closing has some legal equities on its side. But a BUYER relying on doing is a risky and horrible approach. All that said: inquire! communication! planning! get formal extensions to remove ANY controversy.

I would not charge a buyer for a closing delay unless it's a corporate listing and it's required in the corporate addendda. I think if it's a lender delay, the buyer is usually trying to close. Adding additional fees seem to add to the buyer's frustration and make the deal more likely to fall apart.

Hello Shannon,

I don't charge buyers to extend closing due to lender delays. Excluding a foreclosure, I think inserting a penalty for lender delay does not lend itself to good-faith negotiation (pun intended, lol!). It clouds the spirit of cooperation to make the transaction happen for our clients.

No, you can't put anything in special provisions where there is a contract paragraph or other form to address the issue. Paragraph 4 of the Residential Contract, and the first paragraph of the Third Party Finance Addendum clearly address lender timelines and requirements. These provide the buyer the ability to give notice and terminate by a specific date if the lender is unable to complete the financing. If the buyer fails to give notice during the specified time it is understood that the financing is complete. If the lender creates delays after that date, then the parties could agree to an Amendment to change the closing date to accomodate the delay. I would warn against a Realtor writing in a $$ penalty for a lender delay in any Amendment or in paragraph 11 b/c that "could be" interpreted as practicing law w/o a license. It is best practice to avoid "cause and effect" and/or "if then" statements, as these types of verbage create remedies if a certain situation occurs, and that's best left to an attorney to write.

The best practice is to put an adequate number of days in paragraph one of the finance addendum and pay very close attention to the lender's and buyer's progress and the approaching deadline date. If financing is not complete several days prior to the deadline, then attempt to renegotiate to extend the number of days in the Finance Addendum and also move the closing date back by approximately the same number of days.
A buyer's agent who successfully gets extensions to the days in the Finance Addendum keeps her buyer client's ability to terminate alive. But, keep in mind, a listing agent is attempting to bring the financing addendum days to an end, so as to eliminate this contingency and the buyer's ability to terminate.

One way to have a chance at avoiding all of the above is to interview lenders and the first question to ask is, "Do you close on time?" and the second is, "Can you provide me with a list of Realtors and buyers who will attest that you always close on time." It doesn't matter how nice a lender is, if they can't' deliver results by closing on time, then they are OFF my list of lenders to recommend.

Shannon,

I don't know how I feel about this, particularly the part about lender delays. It depends on who you represent.

On one hand, some things are just not in the control of those party to the contract. I wouldn't want my Buyer to be penalized for their lender's delay as these delays could happen despite both the Buyer and their agent staying on top of things. This verbage could deter a Buyer or even cause the agent to write in a longer estimated closing date to cover which could then backfire and take longer to close unnecessarily.

On the other hand, I appreciate that thinking in protecting the seller's best interest so that their time is not wasted.

Just my two cents. ;)