As published in the Savannah Morning News - 23 December 2012
When the Fat Lady Does NOT Sing!
What happens if the buyers change their minds or the closing is delayed? You have moved out of your home, and sold, donated or given away furniture to downsize. Or, your moving van is packed and you need the proceeds from the house to make your next purchase. Everything was going well, with a few negotiating bumps along the way, but who would ever guess the buyers would back out, or not get a loan at the last minute?
As a cautious Realtor®, I always suggest to my senior clients that we negotiate staying in the house a week or so after closing to make sure we are, in fact, having a closing. Even so, it may not be enough to avoid the losses incurred when closings don’t happen: moving costs, replacing sold furniture, lost interest on sale proceeds, etc. These occurrences are rare, but they do happen.
Beware: there is a provision in the Georgia Association of Realtors® Purchase and Sale Agreement (page 2, paragraph 6. B.) for a closing date extension of 7 days. This contractual extension is a unilateral written notice given by one party to the other for limited and specific reasons set forth in the Agreement. It allows for an extension based on delays that are not the fault of the parties. Because of this extension provision, I like to negotiate a Post Closing Occupancy Agreement, which gives seniors a piece of mind that their house will close before they move.
I moved my own Mom last week. We’ll discuss more about this in next week’s article, but this very thing happened to us. As careful as we were to make sure everything looked good for closing, the buyer closed 10 days late. This delay surpassed our safety net, and although we could have cancelled the Agreement and kept the buyer’s deposit, we road it out a few more days. Since we were not sure the sale was going to close at all, we examined our options.
After selling furniture, having a garage sale, and choosing a retirement community with nonrefundable deposits made, we were ready to move. Mom did not want to take care of a large house any longer and we chose to make the move regardless of whether the house closed or not. If it failed to close, we would rent the house and create income for her to live on, greater than what she could have earned in a safe investment.
Like most seniors, the house was paid off, and the expenses were limited to taxes, insurance, association dues and upkeep of the home. Rentals are in demand today, with many people unable to purchase a home due to tough financial times. Renting the house would have worked for Mom, and it certainly was an option. If the numbers work, it is a real solution to a tough problem.
However, what if you need the proceeds from the sale to make your move? That makes the process more difficult. If buyers decide to cancel within the provisions set forth in the Purchase and Sale Agreement, they get their deposit back and everyone goes their merry way. If they have defaulted, and you have not agreed to a closing extension, they will most likely forfeit their earnest money.
Hopefully, you have a large enough deposit to pay for the movers to move your furniture back to your house and to recover any losses. But know this: buyers must sign off to release their deposit and may try to get it back. Realtors® are there to help negotiate a settlement, whether it be an extension of time to close (with or without an added cost for such time to the buyer), or in the case of no closing, a settlement of the earnest money deposit. Sometimes sellers and buyers split the proceeds. Sometimes the seller refuses and the buyer feels the decision is unjust. If you have a dispute over the earnest money, and no agreement can be reached, it’s time to consult an attorney and make sure you have your own representation.
There are also provisions in the Purchase and Sale Agreement (page 4, paragraph 12, A-D) for Return and Disbursement of Earnest Money. Things can get dicey here, so having your attorney and broker involved are highly advised.
Take precautions, get an earnest money deposit that will cover your losses, and have an alternative plan if the fat lady refuses to sing.
Next week, we will discuss moving MY Mom. Stay tuned!