What happens if buyer missed closing date…or any deadline in the home buying process? What happens if a seller misses their deadlines in the purchase contract? Or what if lender missed closing date?
There are legal requirements in Utah with deadlines whether you’re buying a house in Utah or the one selling a house in Utah. In this video post I’m going to talk about what penalties there are if you don’t meet the agreed upon deadlines of the contract.
I’m going to answer questions like: buyer keeps extending closing date, penalty for buyer not closing on time, what happens if buyer missed closing date, when can seller keep earnest money, and more about contract deadlines.
Video Transcript:
What happens if you don’t meet your deadlines to buy a house or you don’t close on a house? That’s what we’re talking about today. Hi, this is Melissa Ballman, with Berkshire Hathaway and Utah Homes by Melissa. So today we are going to talk about whether you are a buyer or a seller in a transaction. What happens if you don’t meet your deadlines of the contract to buy a house or you just don’t even close on the house and meet that deadline?
So if you’ve watched any of my videos on this channel in my buyer series, you hear me and I practically beat a dead horse about shopping around for a lender. But we haven’t really talked about this aspect of why it’s important to shop around for a lender and that is when you shop around for a lender and you have a couple of people that pulled your credit that you’re working with and trying to get the best rates, what happened today for the first time in my 14-year career can possibly be avoided. Okay, so stay tuned later in this video for that real-life example that I’m going to give you about not meeting the deadlines of a transaction and the purchase contract.
But when you’re purchasing a home and all parties have agreed to the purchase contract, you have a few different deadlines. You have your seller’s disclosure deadline, your buyer due diligence deadline, your financing and appraisal deadline and your settlement deadline. And when you don’t meet those deadlines, you either need to have them extended or if you just let them lapse and you don’t say anything, let’s say it’s your due diligence deadline and you don’t respond by that deadline, that means you’re moving forward in the contract and you have no objections to your due diligence. And so your earnest money that you put down at the beginning of your contract or as a seller that you accepted the earnest money amount at the beginning of the contract, now goes hard, is what we call it. So what that means is when your earnest money goes hard, you are no longer able to have that earnest money protected and returned to the buyer in the event that something happens after that deadline that is involved. So let’s say we have our financing and appraisal deadline, that means if that deadline has passed, and after that your lender comes back and says, “oops, sorry, we can’t give you a loan.” Well, sorry, buyer, you just lost your earnest money and any fees that you’ve paid up into that point for inspections or appraisals, that earnest money actually is released to the seller as damages for you not performing on the contract. On the flip side, if you are the buyer and you get to the settlement deadline and the seller decides, oh my gosh, I love my house, I’m not going to sell it, I just can’t leave, there’s too many memories here, and they don’t sell the house to you and you’re sitting at the table, signing your papers, what happens? Well, your earnest money, whatever amount that that is, is returned to you and then the seller, as damages, you have the right to collect that amount of money. So let’s say you put $5,000 down in earnest money, you get your $5,000 back and Mr. and Mrs. Seller have to pay you $5,000 for damages out of their own pocket as well. Now in 14 years, I’ve never had those examples ever happen. We have always come to agreements on either getting extensions or whatever the situation, every situation is different, I’m not going to get into every single one.
But until today, I’ve never had a client miss a deadline and today we did not close by our settlement deadline. So here’s what happened. My buyers were referred to a lender by a family member, as I do with everybody and in all my videos, I encouraged them to shop around and check things out, and they wanted to go with this lender. Fine, I can only lead the horse to water, I can’t force you to do something, right? So we now get to financing and appraisal deadline a few weeks back, and the lender did not have everything in order. So we got in an extension and signed extension agreed to. Okay, so we have our extension because the financing and appraisal deadline is here, and the lender can’t perform on that. So a few days go by after that extension and we find out that they’re not going to be able to, the lender isn’t going to have everything in order to close on time, which was on June 16th, 2020. So we get an extension for a couple of days like we were told. That new extension date comes and they still don’t have everything done, so we have to ask for another extension. Well today at 5:00 p.m., that extension expired. And we still have no signed extension from the seller which they are legally not obligated to keep extending the deadline at this point, we are one week past the original agreed upon date. And they don’t have to keep accepting it, they can take the buyers earnest money and put the house back up for sale. Now obviously, that’s probably not in their best interest, but that is their right as a seller. So just to clarify, there was nothing in this transaction that my buyers did wrong. Everything was turned in and submitted on time. The lender keeps saying, “oh, no, this is going to close, there’s nothing wrong with the buyer.” So things like this happen that are completely out of your control as a buyer, a seller, a real estate agent, so you don’t know what you don’t know in hindsight. Obviously in 14 years I’ve never dealt with this, moving forward will I always tell my buyers this story? Absolutely, I will always tell my buyers this story moving forward to encourage them to shop around. I hope you enjoyed this video, I know it was a little bit heavy, but be sure to subscribe to my YouTube channel. I drop a new video every Friday, and click the bell so you’re alerted to that. As always, if you have any questions or you want me to cover a topic, reach out to me directly or drop me a comment below. Have a great day.