One of the most frustrating events that can happen in a real estate transaction is a delayed closing. Frequently, there is a domino effect that is launched when a closing is delayed. Though each party is responsible for their own contingency plans in the event of a delayed or busted deal, I’ve seen delayed closings impact a chain of subsequent transactions and moving plans. I once even reimbursed a seller for a one-night hotel stay and U-haul rental in order to smooth over a bad situation, even though the delay wasn’t my fault and it wasn’t my seller.
The undeniable law of moving says that when you move, for some period of time, you will either have two places to live, or nowhere to live. Period. This cannot be avoided, though many try to limit the overlap to one day.
A common scenario is that you are a Seller in the morning and a Buyer that afternoon, taking the proceeds of the morning sale and using those funds as a down payment on the afternoon purchase. Meanwhile, your U-Haul sits loaded in the parking lot and you eat lunch technically as a homeless person.
Now, imagine if the Seller (of your new purchase) that afternoon is also a buyer the next morning, and you can see how any disruption in a chain of unrelated but dependent closings can cause one or more people up the line a problem.
Delayed closings are almost always the fault of the lender. Sylvia and I don’t tolerate lenders who can’t close on time. It’s one strike and you’re out. Sorry. No excuse is acceptable. We simply don’t tolerate it, at all, and we don’t care what the reasons are or who is to blame. If you’re a lender who can’t get your paperwork to the Title Company on time and fund the deal on time, you are 100% useless to us and our buyers. That’s the bottom line. There is no other way to hold a lender accountable other than promising never to use them again if they let us down.
This attitude is a result of having to deal with the chaos and frustration of delayed closings a number of times in the past. To say it’s a hassle is an understatement. An amendment to the contract is required, which means chasing down signatures at the last minute. Rescheduling of movers. The parties have often scheduled time off from work on the closing date, so work life is impacted. The prorated amounts have to be adjusted on the settlement statement. If the closing overlaps past the end of a month, it can trigger another full month of interest payment on the payoff for the seller (if the seller has an FHA loan).
Then there are the afformentioned domino deals that create phone calls about “what’s going on with the closing?” from the deal next in line. Plus any number of other unfortunate outcomes or new problems that can also result. In other words, all sorts of trouble and work results from a delayed closing, which is why we view it as an intolerable and unforgivable failure by the lender.
This leads me to the real topic of this blog article. On a recent deal last year, the listing agent, having recently suffered through an unfortunate string of delayed closings caused by incompetent lenders, attempted to insert “buyer guaranty” language into the deal on an addendum.