When a closing date is set, it’s likely that your home will close according to plan. However, there are sometimes issues that can arise that delay a house purchase and prevent it from closing on time. The steps to closing on a home include arranging home inspections, underwriting, approval, appraisal, and all the various contracts that need signing. Take a look at our mortgage process explained infographic to learn more about the steps to closing on a house.
At any point during this process, there could be lengthy delays. But what happens if your house doesn’t close by the closing date? This can depend on the reason for the delay, the buyer’s access to financing, and the decisions of the seller in the event of a delay.
Potential reasons for delays
Everyone involved in a house purchase worries about delays and even the possibility of the purchase falling through. But what would prevent a house from closing?
Common delays and roadblocks can include:
- Faults found during appraisal or surveys – Faults can cause the buyer to back out or ask for repairs as a condition of the sale. If the property condition is poor and does not meet the guidelines for the loan program you’ve selected, we may not be able to move forward with loan approval.
- Low appraisals – If the home appraises for less than the buyer has offered, this could lead to renegotiation of the purchase price.
- A buyer or seller backs out – Either party can change their mind and back out of the sale entirely.
- Difficulties getting financing – Sometimes lenders will not approve a loan which can cause delays. That’s why it’s important to have help on hand to help you prepare for loan approval.
- Insurance companies won’t insure the property – If there are significant faults or the previous homeowner made a big insurance claim, you may struggle to get insurance on the home.
What happens if your house doesn’t close on time?
The consequences of a house failing to close on time depend on the reason for the delay.
If faults or damages are found, the house purchase may be delayed if the buyer asks the seller to make repairs before closing. This means that the buyer and seller would have to renegotiate and come up with another closing date that both parties were happy with.
If it’s a case of the buyer struggling to get approved for financing, this could cause the house purchase to fall through if the problems aren’t rectified. For example, the lender may decide the house is too damaged or a risky investment, and so they may refuse to approve the loan. Alternatively, they could value it at a much lower amount than the buyer offered to pay.
In some cases, the seller may extend the closing date but charge a daily rate for the inconvenience or seek legal advice to recoup damages caused by the delay.
Whatever the reason for the delay, if the home doesn’t close on time, the purchase contract will usually expire. However, this doesn’t always mean the house purchase won’t go ahead. The seller can agree to delay the closing date to give the buyer some extra time. However, they may decide to just put the property back on the market instead.
Learn more about what would prevent a house from closing.
OVM Financial can help you fund your house purchase and help you every step of the house purchase process. We will work closely with all parties involved to prevent any possible delays during your mortgage journey! If you have any questions about your upcoming closing, don’t hesitate to reach out to your loan officer for guidance and the next steps.
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