Contract Prep: Buyers’ Deposits at Risk Due to Lender Delays
What to do when there's an extension on either the buyer’s loan approval period or the closing date due to lenders not being able to get “final clear to close” paperwork together on time.
ORLANDO, Fla. – Many recent calls to the Florida Realtors® Legal Hotline have involved a panicked buyer’s agent who is trying to get an extension on either the buyer’s loan approval period or the closing date – due to lenders not being able to get “final clear to close” paperwork together on time. These delays are the result of a number of factors, including, but not limited to, an increase in refinancing by homeowners and keeping up with normal workflow in the time of COVID-19.
While hopefully sellers who want to sell will be reasonable and grant an extension, it is important for buyers to remember that there is no guarantee that they will get an extension. One way buyers can potentially avoid this issue is to reach out to their lender to ask about the timeline that lender is facing. For example, on average, how long is it taking the lender to close deals? How long is it taking to get loan approvals? In knowing these answers in advance, the buyers can then build the appropriate time into their offer and potentially avoid having to ask for an extension. If you typically represent buyers, you too may want to become familiar with the current practices of the lenders in your area for these same reasons.
On the flip side, it is important for sellers to also be aware of these potential delays. Providing an explanation up front to the sellers, i.e. current lending environment is taking more time, can prepare sellers later in the event they are asked for an extension or may be purchasing other property. As noted before, the sellers do not have to grant an extension. However, it may be more favorable, even if not the preferred choice, to grant a one-week extension to the current buyers than to start all over with a likely-longer time to close with new buyers.
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