Mark Weisleder reminds us that getting an extension date on your closing date has costs and that needs to be addressed; Who Pays?
Buyers often need to request an
extension to their closing date. The main reasons are as follows:·
The buyers have not yet sold their current home; or
·
The buyers' financing has fallen through or the buyers have not
complied with all of the lender's requirements;
The main lesson for everyone is
that no buyer is automatically entitled to an extension. If a buyer can't
close, the seller can take the position that the buyer is in default, sue for
the deposit and any loss that they may suffer in the re-sale of the property.Real estate agents are divided
as to whether you should buy first and then sell your existing home or sell
first and then buy. No solution is risk-free. Buyers also need to remember that
just because you are approved for a loan, you still have to fulfill all of the
lender's requirements, such as proof of income or debt repayment, before they
will give you the money.When you ask for an extension,
here are the terms that you can expect to face from a seller. Remember, your
bargaining position is not good.·
The seller will likely request an additional deposit, equal to the
initial deposit, to be held by the seller lawyer in trust;
·
The buyer will have to pay the seller's interest costs on any
mortgage that cannot be discharged; so for example, if the seller has a
$300,000 mortgage and interest accrues at 4% interest or $33 per day, then the
buyer has to pay this cost for the full extension period;
·
The buyer will pay the seller's legal fees to do the extension,
which can range from $250 - $500, plus HST; and
·
The buyer may have to pay additional costs, depending on when the
extension was requested; - for example, if the extension is requested on the
closing day, and the seller has already packed up the truck, the seller may
request payment of all of their additional moving costs as a result of the
request.
One of the main considerations
for the seller in agreeing to give an extension is whether they need the money
from the sale for their own home purchase closing the same day. This is what
occurred to a buyer client of mine who required an extension at the end of
October, 2013. Their seller also needed to close a purchase the same day. This
seller was able to negotiate an extension of their own sale, but expected my
client to pay all of their extension costs as well. Thus my clients had to pay
the seller and the seller's seller a total of $2,500 to get a one week
extension. This was still a good result for my client, as they could have
forfeited their deposit and faced a lawsuit if the seller did not agree or was
not able to arrange the extension. If you know that you are going
to need an extension, do not wait until the last minute to make the request.
Let your lawyer or real estate agent know as soon as possible and make the
request, so that no unnecessary costs, such as moving arrangements, are entered
into.There
is also closing protection insurance available to home buyers and sellers in
Ontario. One such company who I work with (full disclosure) is Canadian Home
Shield at www.canadianhomeshield.com
. They offer insurance coverage for $99 for home sellers and buyers so that if
their sale is delayed or cancelled and it is not their fault, they can claim
for costs of up to $25,000. I have had several clients take advantage of this
policy to collect damages such as increased moving costs as a result of delayed
closings.
This Insurance is available here as part of the bundle of services that are available for Purchases and Sales of Homes in the west Toronto GTA.
Call today!
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