What Happens if a Seller Missed the Closing Date?
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Richard Haddad Executive EditorRichard Haddad is the executive editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
When a home sale closing is delayed, it’s usually the buyer holding up the deal due to financing hiccups, low appraisals, title issues, or problems found during the final walkthrough. These are common obstacles with obvious solutions. But what happens if a seller misses the closing date?
In this guide, we’ll provide expert insights on why a home seller might miss the closing date, and what you can do to resolve the delay and get your home purchase back on track. We’ll also look at legal options if a seller defaults on the purchase agreement.
“Both parties live and die by what’s in the purchase contract,” says Stephen Donaldson, a leading real estate attorney with The Donaldson Law Firm in New York. “The closing date is always in the contract. If there are contingencies around that, you live and die by the contingencies you’re obligated to. The buyer and seller have rights and obligations to pursue the ‘contract to sell’ to which they agreed.”
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Disclaimer: As a friendly reminder, this blog post is meant to be used for educational purposes, not legal advice. HomeLight always encourages you to reach out to your own advisor.
What happens on a home sale closing date?
The closing date marks the final step in the homebuying process, where ownership officially transfers from the seller to you, the buyer. This day is momentous for several reasons:
- Final walkthrough: You’ll have the chance to inspect the property one last time, ensuring everything is in the agreed-upon condition.
- Signing documents: Both parties sign legal documents, including the deed and mortgage paperwork, finalizing the sale.
- Paying closing costs: You’ll pay any remaining fees and costs associated with the purchase. This often includes loan origination fees, appraisal fees, and title insurance.
- Receiving the keys: At the end of the day, you’ll receive the keys to your new home, marking the beginning of a new chapter.
Reasons a seller might miss the closing date
“The most common reason a seller delays closing is because they don’t have a new place to live yet,” Donaldson says. “They may be planning on buying another home, and they either haven’t found a new one yet, or they are waiting for the people they’re buying from to get out of that house — that second house — so they can move out of the house they’re selling.”
He adds, “Or sometimes if there’s a problem with the mover, they may need another few days. They’ll say, ‘My stuff is still here. I can’t get out because the movers didn’t show up.”
Here are some other common reasons a seller might miss the closing date:
- Financial issues: The seller may be experiencing difficulties in paying off their existing mortgage or other liens against the property, causing delays.
- Title problems: Unexpected issues with the property’s title can arise, such as disputes over property lines or undisclosed easements.
- Repairs taking longer than expected: If the sale is contingent on certain repairs being completed, any delays in these can push back the closing date.
- Personal circumstances: The seller’s personal situations, like illness or a change in family circumstances, can unexpectedly delay the process.
“So if the seller says, ‘Listen, I need more time,’ it’s usually because they or a family member don’t have any place else to go,” Donaldson says. “They may have children who are going off to college, and this is why they’re selling. They say, ‘I haven’t moved out yet; my kid is still here. They’re not going to college for another week. Give me some more time.’”
While we’ve listed the most common reasons, later in this post, we’ll look at some of the more serious uncommon reasons a seller might miss the closing date, such as getting cold feet or not wanting to honor the sale price they originally accepted.
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.
FAQ on when a seller misses the closing date
Whether to grant an extension depends on several factors, including the reason for the delay, the likelihood of resolution, and your own circumstances. Consider the following before deciding:
- Reason for delay: If the seller has a valid reason, like the examples we’ve listed above, and a new reasonable closing date can be set, an extension may be practical.
- Your situation: If the delay does not significantly inconvenience you or incur additional costs, granting an extension is often the best gesture you can offer to keep the deal on track.
- Negotiate terms: Use the extension request as an opportunity to renegotiate terms that might benefit you, such as a reduction in price or coverage of additional expenses.
In many cases, there is no universal or typical specific penalty for a seller missing the closing date. It usually depends on what’s outlined in the purchase agreement. This can range from withholding funds held in escrow to facing legal action for specific performance or damages. The exact consequences depend on the contract’s terms and local laws.
Donaldson says taking legal action should be considered carefully, weighing the potential benefits against the costs and time involved. Legal action can be worth pursuing if:
- Significant investment: You’ve made a significant financial or emotional investment in the property, and finding a similar property would be challenging or more expensive.
- Contractual rights: The seller is clearly in breach of contract, and you have a strong legal position.
- No resolution: All attempts at negotiation or mediation have failed to produce a satisfactory resolution.
Consulting with a real estate attorney can provide clarity on whether legal action is the best course forward.
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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