Once your home is under contract, inspections are over and it’s almost time for your buyer to close on their loan, it feels like your on relatively safe ground. But then just prior to closing, you get word that the lender is delaying your sale. It’s a frustrating scenario, but it happens so it’s important to understand what causes lender delays and what you can do if it happens to you.
Common Reasons for Lender Delays
Even when a lender has preapproved a loan, they still do last-minute checks prior to closing. Those last-minute checks can result in delays as the lender works to:
- Determine the source of funds:
Lenders often verify where the borrower obtained the funds for their down payments and closing costs.
- Request additional backup documents:
The lender may request the borrowers’ pay stubs from prior months to verify their income.
- Ask for letters or explanations of income:
If a borrower has unexplained deposits in their account or has a non-traditional contract or work from home job, the lender may request additional information to verify that the buyer is well-qualified.
- Track down tax return information:
Sometimes, lenders ask for additional tax returns to verify total income
Once the buyer has provided the lender with the requested information or documentation, the sale will move forward.
Seller’s Rights When Lenders Delay Closing
You may think you have no option except to wait and see what happens. While this is true to some degree, you do have a few options. You can:
- Ask questions:
It’s always a good idea to ask the buyer exactly what has caused the delay and find out what they’re doing to resolve it. If it’s a simple matter of a few documents, it likely won’t take too long to resolve. If this is the case, patience is your best course of action. If there’s a more serious issue that’s going to take more time, you can consider one of the other options outlined below.
- Charge a fee as compensation for the delayed sale:
If your home is in high demand, you can advise the buyer that you intend to charge an additional fee for a late closing. This can either be a one-time fee or a daily fee. Should you both agree on this, it’s important to get it in writing to make sure it’s legally binding.
- File a notice to perform:
Naturally, if the delay is problematic, one option to consider is filing a notice to perform and potentially canceling escrow thereafter. While this provides a very narrow window of 48 hours to complete the deal, it can also blow up the sale completely, and you’ll have to start all over again.
Now that you understand what can cause lender delays at closing and you know what you can do about it, you can rest easy knowing that you’re prepared for anything!
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