Deal Drops Dead
In most cases, the signed sales contract will specify a fixed closing date. If the contract also contains a "time of the essence" clause, the parties are out of contract as soon as the fixed date passes and the deal does not close. With no contract, both parties are free to walk away. However, some states, and indeed some contracts, give the buyer a "reasonable" extension of the closing date before either party can kill the deal. A reasonable extension may be anywhere between 10 and 30 days, depending on the circumstances.
"On or About" Closing Dates
Some contracts may specify that closing is to take place on or about a certain date, for example, "on or about 1 March." These "on or about" clauses mean exactly what they say -- that closing will take place on March 1 or sometime around that date, typically within a window of two to four weeks. These clauses can be challenging to interpret. If your contract has an "on or about" closing date and your closing is delayed, ask your real estate agent or attorney about the next steps.
Beware the Knee Jerk Reaction
Exercising your contractual right to terminate can get you out of a frustrating closing. Usually, you'll be able to keep the buyer's earnest deposit, and the contract may impose other penalties for the missed closing. However, canceling the contract means killing the deal. You'll lose the sale proceeds, and you'll have to start the sale process again with a new buyer. Before you do anything, consider taking a step back to review the situation. Saving the deal may be a better option.
Patience Is a Virtue
There are a number of reasons why a closing does not occur as scheduled. In many cases, the buyer simply needs a few days to resolve last-minute loan issues, chase a condominium board approval or transfer funds for closing. In these and other scenarios, the deal will almost certainly close -- if you give it sufficient time. Signing a contract extension that gives the buyer a week or two extra to close will save the deal. Your real estate agent can provide the necessary paperwork.
Show Me the Money
If you choose to give the buyer an extension -- and you don't have to do so -- you can negotiate a penalty for the delayed closing. Often this fee is a "per diem," or daily rate, which is calculated at one-thirtieth of your housing expenses. The per diem compensates you for the additional mortgage, tax and insurance payments you have to make while closing is postponed. The per diem formula is only one suggestion. The aim of a penalty is to push the buyer to stick to the revised closing date. You can negotiate any penalty that achieves your aim.