So your offer was accepted by the seller? Congratulations! While it’s an exciting moment, you may want to hold off on popping the bubbly — the home isn’t quite yours just yet. You still have to make it through closing, where unfortunately, many buyers stumble before they can reach the finish line.
Once your offer is accepted, you typically have 30 to 45 days before your closing date. During this time buyers will get an inspection and finalize their financing with their lender. But, it’s also during this time when your previous champagne-popping excitement can end quite abruptly.
Whether the inspection reveals substantial damage, you have trouble obtaining homeowners insurance, or your financing falls through, all can cause you to miss your close date throwing a strain on the deal.
When the close date is missed, 9 out of 10 times it’s the buyer’s fault. And sending a nice fruit basket to the seller isn’t going to cut it. Rather, you stand to face a penalty from the seller for the delay.
5 Penalties for Missing Your Closing Date
1. You Could Face a Per Diem
Once the closing date passes, the seller can choose to extend the closing deadline and charge you a per diem, or daily rate, not only for the inconvenience, but to cover the additional mortgage, tax, and insurance payments the seller still needs to make as a result of the postponed date.
Typically, the per diem rate is one-thirtieth of the seller’s housing expenses. This penalty shouldn’t cause you to fall spectacularly into debt, but the additional financial burden can make meeting the new closing deadline much more stressful.
2. Forfeit Your Earnest Money Deposit
Your earnest money deposit, or your good faith money proving to the seller you have the funds to purchase the home, will be relinquished to the seller for all the trouble.
While traditionally the earnest money deposit would be returned to you at closing, which you could then put towards the down payment or closing costs, in this scenario, your earnest money deposit will be nonrefundable.
3. The Seller Can Kill the Deal
Unfortunately, the seller could opt to cancel the sale altogether. While it’s not usually in the best interest of the seller to walk away from the sale as they’d have to start the selling process all over again, they may want out if they believe can get a better offer, the negotiations got contentious, or they’re simply frustrated by the delay.
However, depending on the contract the seller may not be able to legally cancel the sale. If you have a legitimate reason why you missed the closing date, the courts will likely rule in your favor allowing a reasonable postponement that generally gives the buyer an additional 30 days to close the sale.
4. Sellers Can Seek Legal Recourse for Damages
Even if the reason you missed the closing date was out of your control and unintentional, a seller could take legal action as, technically, you are in breach of contract.
The seller can ask the court to be compensated for quantifiable monetary damages including the costs for continued payment on a mortgage, taxes, insurance, or if they had to continue to rent a storage unit to house their furniture for staging.
In the most extreme case, the seller can sue you, asking the courts to force you to purchase their home regardless if your financing fell through or even if you as the buyer want out of the sale.
Generally, most contract agreements use language that specifically prevents this worst-case scenario, but you’ll want to consult with your agent to make sure a lawsuit isn’t an option.
5. You’re Up Against the Time of the Essence Clause
Yes, the time of the essence clause is as dramatic as it sounds. In short, if your purchase agreement contains the time of the essence clause, this means you have a hard deadline for closing regardless of any financing issues or other snafus that arise.
If you don’t meet the time of the essence deadline, the contract is null and either party — seller or buyer — can walk away from the deal. It’s less likely you’ll run into a time of the essence provision, though if you do, in some instances you still may be able to negotiate with the seller for an extension.
Work with a Clever Partner Agent
To help you navigate the entire buying process and help you avoid these penalties by ensuring you’ll meet the closing date, work with an experienced, local Clever Partner Agent. Not only will your Partner Agent help you find an amazing home in your budget, but they’ll be able to manage your expectations and create a realistic timeframe so you don’t run into any surprises when in escrow and miss the closing date.
And if everything goes wrong and you do miss the closing date, your Partner Agent will use their expertise to negotiate a reasonable penalty so you still get the home you’ve always wanted without a significant hit to you financially.
And when you work with Clever you’ll find even more cost-saving opportunities as you may be eligible for our Home Buyer Rebate program where you’ll receive $1,000 on homes over $150,000 (or up to 1% back on homes over $500,000) that you can use to cover closing. Reach out to Clever to connect with your Partner Agent.