What Happens When Your Closing Goes Awry?

As a buyer or seller, when you get the call that your closing is scheduled, you’re home free, right? Not always. The real estate and banking industries are full of…human beings. That means that sometimes things don’t go exactly as planned. Below are some common issues that may arise, but don’t worry – with a little patience, you can overcome them!

Your Buyer Can’t Close

Common issues: The buyer’s loan has underwriting issues, they change jobs or their credit situation is altered.

Unfortunately, if your buyer runs into issues with their financing, you don’t have a lot of options but to delay your closing. The best thing to do is have your agent set a new date for closing in writing as an addendum. If the deal falls apart completely, ask your agent to contact the buyer’s agents on other offers you may have received, but didn’t accept. This will be your best option before going back on the market.

Your Seller Can’t Close

Common issues: The seller can’t move out in time, their other move falls through or there is a family emergency.

Try to be patient and work with your agent to come up with a plan that keeps the sale on track. One option could be to offer occupancy if the seller needs more time to arrange a move. Occupancy is where you get compensated for allowing the seller to remain in the home for a predetermined time after closing (offering occupancy is also used by buyers to strengthen their offers). Trust your agent to act on your behalf. Each party has the same goal, which is to close.

Title Discrepancies

Common issues: A second mortgage comes out of the woodwork or there is a cloud on the title (meaning someone else has an interest on the property that wasn’t disclosed).

These unfortunate surprises can usually be resolved by the title companies in the transaction. Discrepancies on the title are relatively rare, but can usually be taken care of through due diligence. This is a critical reason to get a title insurance policy! Having an owner’s title policy in place will protect you legally from any title discrepancies.

Failure to Make Repairs

Common issues: A repair contingency wasn’t met, meaning that the seller failed to have a required repair made before closing.

You have a couple of options here. One is to keep your closing date and close on the property in an ‘as-is’ condition, with some additional monetary compensation from the seller to make the repairs yourself. Or, you can delay your closing and extend the contract so that the seller can make the repairs needed. It’s important to note that if these are FHA-mandated repairs, you will be forced to wait until the repairs are completed before you can close.

City and Municipal Bureaucracy

Common issues: Holdups on city inspections or getting a certificate of occupancy.

If you’re a seller, it’s critical to get a jump on these items as soon as you even think about listing your home on the market. Inspections often require more than one appointment, which can leave you at the mercy of your city’s scheduling. If you are a buyer, make sure your agent is leaning on the listing agent to get these things done in a timely manner.

Breach of Contract

Common issues: The buyer or seller backs out of the transaction entirely, breaking the terms of the contract.

In rare cases, one party decides that they can no longer move forward with the sale of a property. If you are faced with this situation, you can decide to pursue legal action for non-performance. However, this involves consulting an attorney and could potentially be more effort than it’s worth. Every situation is different, but take solace that in the grand scheme of things this is a very uncommon occurrence.

So, What Now?

Let’s say that despite you and your agent’s best efforts to save the deal, your closing has to be delayed or canceled. Like all things in life, the first step is not to panic. Buying and selling a home is an incredibly stressful time, but more often than not, a solution can be found. Here are a few things to keep in mind if you do run into a problem with your closing.

  • Make temporary arrangements for living as soon as possible
  • Call off your movers
  • Stay in communication with your agent to make a plan going forward
  • Get going on any outstanding items needed to close as soon as possible
  • Discuss possible occupancy of your current home with your agent
  • Get the advice of an attorney, if necessary
  • Breathe. In most cases, everyone wants to close and are all looking to get to the finish line

A delayed or canceled closing can feel like the worst news in the world. But as long as you keep a level head and practice some patience, you can overcome most of the obstacles in your way. Good luck!