What Happens if a Seller Missed the Closing Date?

What happens if the seller misses the closing date?

When a seller misses the closing date, the consequences and next steps can vary depending on the situation. Let’s explore different scenarios you might face as a buyer:

Does the seller want to sell the house? (delay)

If the seller is committed to the sale but has encountered delays, you might face a postponement. In this case, both parties can agree to extend the closing date. However, as a buyer, you may need to renegotiate terms or ask for compensation, especially if the delay incurs additional costs on your end.

“If it’s just a matter of a few days delay, it’s usually not that big a deal,” Donaldson says. “If a buyer says, ‘Listen, I already have my move rescheduled, it’s going to cost me $1,000 to reschedule those movers.’ The seller may say, ‘Alright, I understand. I’ll give you $1,000 credit at closing because I understand this is an inconvenience and it does cost you this money.’”

Is the seller able to sell the house? (unexpected issue)

Sometimes, sellers discover unexpected issues that prevent them from selling the house by the agreed date. This could be due to legal complications or title problems. In such cases, patience is required, but you also have the right to request updates and a clear timeline for resolution. If the issue cannot be resolved promptly, you may consider walking away from the deal. In many of these cases, time is the solution.

“Because litigation will take months, if not years, moving a closing three weeks — as inconvenient as it may seem — is the most convenient option compared to litigation or any other kind of tactic,” Donaldson advises. “And the best way to get there, the best way to do that is just picking up the phone and asking for some courtesy from the other party…just being reasonable is the best way to go about it.”

Does the seller want more money? (not honoring sale price)

If the seller is attempting to renegotiate the sale price after the agreement, it’s essential to stand firm on the agreed terms. Such a move can be seen as a breach of contract. Consult with your real estate attorney to understand your rights, which might include insisting on the original terms or seeking damages.

Are you working with a real seller? (mortgage closing scam)

Beware of mortgage closing scams where the “seller” doesn’t actually own the property. Always ensure all communications and transactions go through verified channels, and conduct due diligence on the property history and title. If you suspect a scam, report it immediately and halt all proceedings.

Is the seller backing out completely? (cold feet)

If the seller gets cold feet and decides to back out entirely, you have legal rights under the purchase agreement. You might opt to negotiate, seek damages, or force the sale through specific performance, depending on your contract and local laws. Legal advice is crucial in such situations to explore your options. In the next section, we’ll take a closer look at your options.

What if the seller defaults with no offered resolution?

When a seller defaults on the agreement without offering a resolution, it leaves the buyer in a precarious position.

“I’ll start by saying that you always want to avoid any kind of litigation based on a contract because it’s expensive and it’s time-consuming,” Donaldson says. “It is almost always better to encourage clients to have some patience.”

However, if patience has been used up, buyers have the right to seek legal recourse when a seller defaults. This can involve filing a lawsuit for breach of contract. The specific legal remedies available depend on the contract terms and local real estate laws. Understanding the options available can guide you through this challenging situation.

Specific performance

“When a seller tries to back out of the deal, typically a buyer is entitled to ‘specific performance.’” Donaldson says. “The buyer says to the seller, ‘You signed the contract that you were going to sell me this property. You don’t have the contractual right to back out of this contract. I am going to sue you for what we call specific performance,’ meaning, ‘You must sell me this house.’”

Specific performance is often sought by buyers when the property is unique, and monetary compensation is not a satisfactory remedy.

Monetary damages

If specific performance is not an option or not desired, buyers may seek monetary damages for the breach.

“There are other options available to buyers, what we call legal and equitable damages or remedies,” Donaldson explains. “What those are, depends on the buyer and how things work out.”

This compensation can cover costs incurred from the breach, including temporary housing, additional moving expenses, and any difference in cost if the buyer has to purchase a similar property at a higher price.

“A buyer could say to the seller, ‘Okay, you want to back out. I’ve invested this much money in home inspections, appraisals, surveys, title inspections, and I also sold my own home — or whatever it may be — so by backing out, you cost me to lose this amount of money. So, if you’re not going to sell me your home, this is the amount of legal damages that you owe me.”’

Earnest money recovery

We may be stating the obvious here, but buyers are typically entitled to recover their earnest money deposit if the seller defaults. Depending on the contract terms, buyers might also be eligible for additional compensation, as noted above.

Liquidated damages

Some purchase contracts include a liquidated damages clause, which pre-determines the amount of money one party pays to the other in case of a breach. If such a clause exists, the buyer may claim this amount as compensation for the default

Negotiation and mediation

Before taking legal action, Donaldson recommends starting with civil negotiation or mediation to arrange for a new closing date that works for the seller. This can lead to a resolution that satisfies both parties without the need for a prolonged legal battle. A mediator or an attorney can facilitate these discussions and help reach an amicable agreement.

In his New York market, he explains that closing dates are listed on the purchase agreement as “on or about” a listed date. “Meaning that they’re not firm, that they’re moving targets. So under New York law, that gives either side [wiggle room] to delay closing for up to thirty days. The seller says, ‘Listen, I can’t close on February 15th; we need some more time.”

If your contract uses “on or about” closing date language, you can take the next step by having your attorney send a “Time is of the essence” letter.

“It basically says, ‘Listen, seller, we had this closing scheduled, you didn’t arrive. I am now making the closing date firm by way of this letter. Now, time is of the essence. Closing is now scheduled for approximately thirty days, or for this date.” Donaldson says. “The specific date is usually thirty days after the closing date that never happened. And then, if the show seller doesn’t show up on that date, the firm date, the contract has been breached. The seller has defaulted.”

What if there is a seller contingency in the contract?

Your purchase contract might include contingency clauses that protect the seller if they miss the closing date under certain conditions. Understanding these can help manage expectations and strategize your next steps. Let’s look at two examples.

What is a home of choice contingency?

This clause, sometimes called a suitable property contingency, allows the seller to delay closing until they have secured a new property to move into. It’s the seller-side version of a buyer’s home sale contingency. If the seller is unable to find a suitable home within a predefined period, both parties might have the option to cancel the contract, or you could negotiate an extension if you’re still interested in the property.

What is a kick-out clause?

A kick-out clause gives the seller the right to continue marketing the property even after accepting your offer, especially if your offer comes with contingencies (like needing to sell your current home). If another buyer comes along with a more attractive offer (no contingencies, higher bid), the seller can give you a specified amount of time (usually 72 hours) to remove your contingencies and proceed with the sale or step aside.

Bottom line: If a seller misses the closing date

The closing date in a real estate transaction is a pivotal moment for both buyers and sellers. When a seller misses this date, it can create uncertainty and potential financial implications for the buyer.

While it’s important to have a clear understanding of your legal rights and the terms of your purchase agreement, Donaldson always recommends open communication. “All this boils down to what you do with the selling party to try to negotiate some alternative closing date.”

He suggests navigating these challenges with patience, informed decision-making, and then — only when necessary — consulting an attorney for possible legal action.

Remember, the goal is to achieve a resolution that allows you to move forward, whether that means closing on the current property under revised terms or pursuing alternatives that better serve your needs.

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