Buying and selling a property involves many different moving parts that must align in order for the transaction to go through. Unfortunately, things don’t always go exactly as planned, but that’s why every sales transaction includes a purchase agreement to fall back on. Closing dates are part of the purchase agreement and must be agreed upon in writing by both the buyer and the seller. But what happens if the buyer defaults on the closing date? According to a top closing lawyer in Toronto, there are a few different options to consider.
Contact the Buyer’s Closing Lawyer
Once the offer is accepted, it’s time for the real estate agents on both sides to get into contact with one another to ensure that the entire transaction goes smoothly and that there won’t be any delays. The next step is for the buyer to schedule a home inspection so that an appraisal can be made. If the buyer fails to schedule a home inspection or get an appraisal, then this is a sign that the closing could be delayed because the buyer has problems with either his financing or issues with the condition of the home before closing
Time-Is-of-the-Essence Provision
House closing lawyers in Toronto know that time is always of the essence when it comes to these types of high stakes property sale transactions. This is why there is such clause in every standard agreement of purchase and sale. Failing to close on a property can have a long and expensive domino effect. Typically, the seller is also purchasing a property and when the funds of the first sale don’t come through, then they have to default as a buyer in another transaction and the cycle continues. A time-is-of-the-essence clause is there in an agreement of purchase and sale from the beginning to indicate that the closing date is set in stone and can’t be extended due to time restrictions. That way, if the deal does falter, then both parties can back out without any legal repercussions and the property goes back on the market.
Extend the Closing Date
Home inspections can reveal some unforeseen damages that need to be repaired immediately before the buyer can occupy the property, damages that happen after the buyer bought the property but before actual final closing. Depending on the extent and cost of these repairs, this could influence the buyer’s ability to continue with the purchase—especially if there’s a tight deadline. To entice the buyer to continue with the sale, the seller and buyer can agree to extend the closing date to provide enough time to get the repairs done. Both parties must agree to the closing date extension in writing.
Bridge Financing
If a buyer defaults on a sales transaction for any reason and this impacts the seller’s ability to move forward with their own property purchase, then the seller can apply for a bridge financing loan or agreement with their bank. This is a short-term bank loan that provides enough funds over a brief period of time for the seller to close on a different home purchasing transaction.
What Are the Penalties if a Buyer Fails to Close on Time?
- Per diem. If a closing date is delayed, the seller can charge a per diem cost that’s charged for every day that the closing date is extended. The total amount is calculated and paid at the time of the actual closing.
- Earnest money / deposit. This is a good faith deposit that buyers put down on a house to show sellers that they’re seriously interested in purchasing the property. A good lawyer will request an increase of these deposits before agreeing to an extension.
- Legal and other miscellaneous costs. There are other costs associated with failing to close by a buyer that a good lawyer will help you determine before agreeing to any extension
Hire the Best Closing Lawyer in Toronto to Manage Your Sale
Zinati Kay – Real Estate Lawyers have been working in the Toronto and GTA housing market for over 25 years. We’ve handled all kinds of transactions and advised our clients on what to do in the event of delayed closing dates. As far as Toronto real estate closing costs go, ours are comparatively lower than our competitors. Contact us today to learn more or to schedule a consultation.