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35 Comments on How Long Should a Seller Wait for Closing?
Gary- I agree and for all of the reasons you pointed out. Too many things can occur that can derail the deal.
The longer the escrow, the more problems that tend to crop up. Couple this with a FSBO and my guess is the deal never makes it to the table.
Bill - I would go along with that as well. Thanks.
Kathy - Thanks!
Doug - Amen...time can only add problems...thanks!
Time kills deals, no question. The enthusiasm evaporates, jobs are lost, divorces happen, or a better deal turns up. Keep 'em focused and get it closed?
I recently listed a house that was under contract in 2 days with a 30 day closing. The sellers are scrambling to find temporary housing because they are building a house that won't be ready until November. You just never know how quickly a home will sell.
45-60 max, after that then part or all of the EM is not refundable. the seller is taking the home off the market and if things fall through they could be hurt in the market. The non refundable EM has to be at least 3.5% to be a good deterent from cancelling. That will make the buyers REAL.
On the seller side it is a little tougher and can be a real hinderance to the buyer. If a buyer can wait great and there is time to do a good inspection and any necessary repairs. It will limit the number of buyers that can and will wait that long. Maybe the buyer can/will do a one month rent back to to the seller? Can still work to benefit both.
Here in Orange County, CA we have such a large number of REO’s, Investors and Short Sales I think buyers have gotten accustom to the “longer” escrow periods. However, my first question to any seller/buyer is “how soon would you like to be living in your new home”? From there I can ascertain the direction we should consider on the properties we’ve looked at. Also, some buyers just get tired of all the Realtors that “mishandle” short timelines and drag this process out much longer than necessary. I’ve had situations where I will actually help the listing agent navigate the short sale negotiation process, because they just don’t have the experience dealing with the banks. Banks don’t do well with incomplete packages…
I’d have to say that unless it’s an equity sale with a truly motivated seller, we prepare our buyers for 60 and hope for 90 days. As for our distressed closings, it really depends on the bank, the numbers of liens on the property, child support liens, and abstracts of judgment and IRS judgments. But, with all that debris in the way, it’s always going to be the buyer that sees the value that stays the course…
Creating value has been our best tool for keeping clients’ in the deal…
As they say, "time kills all deals." That being said, closing time frames are different based on the geographic market and the asset. Condos are co-ops are rarely closed in NYC in less than 60 days. I had one deal that just closed last week after six months in contract because it didn't appraise but the buyer didn't have an appraisal contingency or an LTV stated in the mortgage contingency. The lender was more than happy to lend to them, just not more than 80% of the appraised value. Fortunately for us, the buyer was putting down 50% and had made a $75k earnest money deposit. We negotiated the purchase price but still closed $125k over the appraised value.
We had another deal last fall that was in contract for seven months. We repped the buyer and found out after the contracts were signed that the seller's architect had failed to close out a couple of permits during a prior renovation. The contract was silent as to how long the seller had to cure this breach. Since the Department of Buildings is severely backed up, it took them about six months to re-open the permits, inspect the property, and close out the permits. Sometimes deals just don't seem to want to close!
Every sales agreement I write up is for six weeks from acceptance to settlement. Few exceptions, unless it can be sooner.
Great post Gary - I only wish more Active Rainers would comment about how short sale lenders fail to grasp this excellent point!
In an ideal world, 30 days should be enough. Sometimes 45-60 is just what has to happen. When there is a financing contingency and it is beyond 45 days, you start wondering though if they really can close. Of course those short sales are notorious for finding ways to drag these out and sadly kill many deals.
D.C. That would require them to have some skin in the deal. I “guarantee” if they were on straight commission that would change everything. Having one side of the transaction depending on the deal closing to make a living and the other side getting a salary and benefits regardless of the outcome dilutes the momentum to cross the finish line in a timely manner…
I am very uncomfortable with anything beyond 45 days too. Cash and 10 is the best.
Hi Gary, I am in a situation like that right now. Seller wants to delay closing on their sale until their new purchase is ready. Too risky to me!
Ric - Whatever it takes to get it done as long as the parties are motivated and the arrangement works for them.
Bill - 60 and hope for 90 is a stretch but it is the market we work in. Thanks.
Mike - In the real world issues arise and take time. Fortunately not all deals are like yours. Having motivated buyers and sellers help overcome any of these issues. Thanks!
M.C. - Short sale lenders...will the day come when we don't have them to deal with?
Frank - Ideally 30 days would be the ultimate! Financing is taking a bit longer these days and I can understand. Thanks!
Bill - You are right. Skin in the game is a motivator.
Debbie - That is it...the things that are out of our control. Thanks.
Gene - 45 days is about as far as I am comfortable with myself. Thanks.
Bob - It is all about evaluating the risk - to sellers, buyers and to the transaction. Thanks.
Lenn's example is ridiculous as most people in my area go 45 or so with 60 being the latest.
Great question Gary, and for different people and different properties the time will vary.
More recently with our business line of credit we can often close in less than a week.
However when I first started investing many many years ago, and financing was much more difficult, I would routinely ask for 90 days to close, this allowed me to seek secondary financing if the first one did not work out, sometimes with angel financing and it often went right to the deadline to get the deal worked out, but we always closed eventually.
If I were selling, I would probably only offer terms like this if it was a difficult property with very few potential buyers.
Lyn - 45 days is pretty much the norm here nowadays.
Bob - A week is nice anytime. I guess the situations and the parties involved vary so each case is a different right answer. Thanks.