Short Sale Closing Dates – Are They Binding?
There are important differences to buyers and sellers when you sell a house on a short sale (a transaction where the bank agrees to accept less than the property is worth). Not only does it involve months of waiting for the bank to approve the short sale, but the terms of the contract the seller signs with the prospective buyer may be more binding than you think.
It may take months of waiting for a short sale to be approved by the bank, and once it’s approved the buyer may think it’s all smooth sailing from then on. However, if the lender can’t be ready to close by the date listed on the contract it could mean losing the house all together.
Lenders Call the Shots
Lenders are used to calling the shots for home buyers. The lender generally decides when the sale will close but in short sales, the short sale bank picks the closing date. In these cases, the wording of the contract is key.
In some jurisdictions, the closing date on the contract is not binding unless it is made “of the essence”. Closings are often postponed in regular sales until one side or the other notifies the parties that the closing date is firm and that “time is of the essence”. Although valid excuses may come up, it may be too late to postpone the sale. The breach of contract for failing to close on time could be enough for the seller’s bank to get out of the contract.
The terms of your contract are crucial and should be written with these contingencies in mind. If you need assistance with this matter in our area, contact a Burlington county short sale lawyer to navigate through this difficult process.
Getting an Extension on a Short Sale
Some banks under certain circumstances will extend the contract, mainly because banks prefer a short sale over a foreclosure. Doing a short sale must make more financial sense to the bank and be more profitable than a foreclosure. Although most banks may give an extension to close a short sale, not all will. There are some steps that could be taken to increase your odds of getting one.
– Include a guaranteed closing date. This generally means that your lender will be ready to fund the loan once you sign and return the loan documents.
– Sign an addendum extending the closing. The short sale bank may want an assurance that all parties to the short sale are still on board and ready to close. If you can send an addendum to the bank signed by all the buyers and sellers, this may prove to them that everyone has agreed to the extension.
– Submit an updated pre-approval letter or proof of funds from the buyer. The letter you originally submitted to the bank may be a few months old since the bank issued its short sale approval.
– Reaffirm the buyer’s commitment and capacity to close.
– Keep Your Cool
Even if all else fails, do not demand an extension or you may not get one at all. Be professional and treat the negotiator with respect. Explain the extenuating circumstances or the reasons behind the delay and assure the negotiator of the date by which you will close. Don’t forget that an extension by a short sale bank is a privilege and not a right. Some banks may even charge you a fee, which may be calculated by day or a percentage of the net.