What happens if the loan won’t be processed by the closing date?
12/16/2014 | Author: Legal Staff
I’m buying a home, and the closing was supposed to be today. However, my lender says it’s going to take a few more days to process the loan. Since we had 30 days from the time we signed the contract until closing, I thought that would plenty of time. What happens now?
This scenario has become more common recently, as federal regulations imposed by the Dodd Frank Wall Street Reform and Consumer Protection Act have made 30-day closings harder to complete on time than in the past.
The contract does not include an automatic extension if the lender doesn’t process the loan by the closing date. As such, the seller could claim that you did not uphold your contractual obligations. However, since time is not of the essence to the closing date, you could argue that a few extra days is not a material breach of the contract. Alternatively, you and the seller may agree to amend the contract to provide more time for the lender to process the loan. It is important to remember that the seller must agree to amend the contract and may require additional earnest money as a condition of signing the amendment to extend closing.
Given the challenges of meeting a 30-day time frame these days, buyers may want to consider allowing more than 30 days from the execution of a contract until closing.
What happens when the title company has just dragged and dragged about getting the property to closing? No sense of urgency on their part, title co. attorney saying surveyor needs to go back out because he “forgot a couple easements” and when that survey is done, things will get moving, but we get the sense this attorney is not in reg contact with surveyor…this particular issue has been going on for over 2 months, and closing was supposed to be 3 months ago. Buyer has rented the prop for years and is now buying it, so there is no real estate agent, seller or buyer attorney involved to represent seller/buyer interests…trying to save costs. Is there any recourse for getting this moved along? Do the seller/buyer have any way to motivate this title attorney to do her job?
I’ve never had a lender hold up a closing, but I have had a title company who did. We had to extend the closing date with an extension twice. It was the worst experience I’ve had closing a house. Granted, there were a couple things that happened that made it difficult - ice days in Dallas closing down county offices when we needed a foreclosure deed recorded - but lack of follow through and lack of a sense of urgency on the part of the title company is really what caused a delay. Unfortunately, since the house was a foreclosure, the title company we used was out of mine and the seller’s agent’s hands. I have always appreciated competent lenders and title companies, but none more than I did after that house finally closed. With the market being the way it is, there really are few reasons a house shouldn’t close in 30 days. 45 does give a bit more time, but 30 days requires an agent who is on top of their game and can make sure things are moving in the right direction. Having a good lender and title company alleviates a lot of that stress.
Pray tell who your lenders are that can close in 12 days. I would be ecstatic with 30 days even. I don’t know if that is legal on this threat. Seems I am always having to do extensions.
I had a deal close last month that took 12 days. You guys might need to get new mortgage people into your portfolio if you think it should take 45-60 days to close a loan. None of my recent loans have taken anywhere near that time.
The backlog for appraisals and surveys can hold up the financing. The norm now on non cash transaction is closer to the 45 to 60 day range especially on rural property.
I always check with the lender before inserting a closing date to ensure that it will be sufficient time to process the loan. I also advise my buyer that time is of the essence and that communicating with the lender in regards to document submission is a must.
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