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Extending a closing date for a home
Jan 24, 2014
Buyers often have to extend their closing date.
Main reasons are:
The buyers have not yet sold their current home.
The buyers financing has fallen through or the buyer's have not met with the lenders requirements.
No buyer is automatically entitled to an extension. The seller can take the position that the buyer is in default, sue for the deposit and any loss incurred in the resale of the property.
Whether you should buy first then sell or sell then buy is an argument that is divided among Real Estate Agents.
Buyers should be cognizant that although they were approved for a loan you still have to fulfill all the lenders requirements such as proof of income or debt repayment.
When you ask for an extension here are the terms you can expect from the seller:
The seller will probably request a further deposit equal to the initial deposit to be held in trust by the seller's lawyer.
This deposit will be forfeited if the buyer cannot close on the new extended closing date.
The buyer will have to pay the seller's interest costs on any mortgage that cannot be discharged
The buyer will pay any legal fees to do the extension.
The buyer may have additional costs depending on the circumstances. If you request the extension on the day of closing and the seller has already packed up the truck, you may be asked to pay additional moving costs.
One of the main considerations for the seller will be if they need the money to purchase their new home closing on the same day. The buyer may then have to pay costs for the sellers negotiations to extend their closing date to accommodate the buyers request which at least will be cheaper than forfeiting the deposit.
If you know you need an extension, do not delay in letting your lawyer and real estate agent know. This will prevent unnecessary costs such as moveing arrangements to be avoided.
FYI For $99.00 home sellers and buyers can have insurance coverage so that if the sale is delayed or cancelled and it is not their fault they can claim up to costs of $25,000.00. Canadian Home Shield www.canadianhomeshield.com.
Adapted from Mark Weisleder's column in the Toronto Star.