You have to pay the late / extention penalties not closing an REO deal on time!!!!!

By
Real Estate Agent with Keller Williams Realty Las Vegas

So, for the past 2 months, there hasn't been not one deal that I've had close on time (meaning the original closing date on the contract). The problem that I'm seeing is that EVERY SINGLE TIME the buyers don't want to pay the penalties for closing late!!! Just about every bank has it in their addendum/counter offer that if the buyer doesn't close on time, then they have to pay both an extension fee and per diam until they actually close the deal. IT DOESN'T MATTER WHO ON THE BUYER SIDE IS CAUSING THE DELAY. IT CAN BE THE BUYER, BUYER'S AGENT, BUYER'S LENDER, BUYER'S DOG, BUYER'S GRANDMOTHER, BUYER'S ANYTHING. IF THE BUYER'S SIDE IS LATE TO CLOSE, BE PREPARED TO PAY THE PENALTIES!!!

On every deal, there is some excuse as to why they can't close on time. And I'm always hearing from the buyer's agent "Well the buyer feels it's not their fault that the lender can't get docs so they don't want to pay the penalty" Or some other excuse. If you are going with the banks lender then maybe that can be worked out, but if you brought your own lender to the table (even if it was at your agents suggestion) then that is YOUR lender and YOU (as the buyer) are responsible for them not closing on time!!!! If you as the buyer don't want to pay the extension and per diam, then work that out between the lender and your buyer's agent. IT'S NOT THE SELLERS ISSUE.

Well two of my banks have put their "foot down" and we have actually lost two deals this month because the buyer's didn't want to pay the 300 dollar extension fee!!!! This is after the bank WAIVED the per diam and only required the extension fee!! I'm not understanding how you can sign off agreeing to pay the fee in the beginning and when you default, you're talking about "I don't feel I should have to pay!"

It's in BLACK AND WHITE "I will pay the extension fee and per diam if for any reason I don't close on time after my due dillegence period has expired." That why I love the banks because everything is in black and white, not left up to chance.

Moral of the story is, banks are starting to kill deals over the extension fees. So tell your buyer's (IN THE BEGINNING) to be prepared to pay those fees if ANYBODY on their side doesn't close, or face losing the house.

Bryan Knight, REO Specialist in Las Vegas, NV

Follow me at www.twitter.com/KnightREO

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Rainer
54,699
Chad Baird
Re/Max Spirit - Dayton, OH

I had a buyer that was late on a property (there fault) and was charged a 100 doller per diem.  My client threw a fit and wanted it waived.  I agreed to pay the per diem just to close the deal, the LA generously agreed to spit the cost with me (it had been a difficult ride). 

I told my client that we (the agents) took care of the per diem all was fine.  The client misunderstood what taking care of it meant, because it was on the HUD.  My client threw a fit and refused to close over the per diem "out of principle"????  He killed the deal. 

His "priniple" cost him 3K in deposit money, for a 100 dollar fine that was paid for him on an issue that was his fault to begin with? 

Dec 28, 2008 02:52 PM #1
Rainer
28,574
Elena Martinovici
Professional Marketing Realty 602-321-1273 - Phoenix, AZ
Designated Broker- Phoenix , Arizona

Well on the other side of the equation I had a buyer kill the deal because the seller could not provide clear title on time and was not ready for closing. my client ( cash buyer ) refusedto wait and went elsewhere since no one could give us an answer as to when the  dear title will be ready.

Another lender we had to extend the contract ( not my buyers fault ) because the water and electric wasn't getting turned on and we had no time to do any inspections before the COE.  we did close on that one week after the Scheduled COE.

So this goes both ways. Yes these days buyer don't feel like they wana pay for anythign since they feel like there doing the lender a favor buying the property .....

Jan 09, 2009 08:00 PM #2
Rainmaker
695,997
Kay Van Kampen
RE/MAX Broker, RE/MAX Solutions - Springfield, MO
RealtorĀ®, Springfield Mo Real Estate

I've seen the same thing happening here.  I caution the buyers that if they don't want to pay, they will make sure their lender is on time.  Pointing out the penalty up front and making them sign that they acknowledge this, sure puts a fire under them.

Jan 09, 2009 08:12 PM #3
Rainer
22,439
Sonya Mays, MBA
Midwest Executive Realty - Brown Deer, WI
Broker/Owner, Greater Milwaukee/Ozaukee County

Bryan, I feel your pain. I've had about 2-3 recent deals fall apart due to the buyers not wanting to pay the per diem, blaming the lender or blaming the seller for not having the property de-winterized in time so they could conduct their inspections.  I would imagine that someone should take responsibility for the delay, but when it comes to monetary penalties being enforced, no one wants to own up. 

One of my banks rejected an Amendment that the buyer submitted to waive per diem and said that $100 per diem applies each day it is not closed.  We are now on day 10 and they appear to be taking their sweet little time trying to find another lender because the first lender dragged his feet and couldn't close on time.  As of today the per diem penalty is up to $1,000, plus $100 per day for each day we don't close, the earnest money is now considered earned by the seller! 

Jan 09, 2009 10:47 PM #4
Rainer
5,953
Matt Peters
RE/MAX Premiere - Albuquerque, NM
(New Mexico Broker)

I only have one REO account that has penalties for delays in closing, and they have been willing to waive those fees to keep the deals together.  I think they understand the "financing issues" that we are all facing. Nothing seems to be predictable in financing and getting to closing anymore.

Admittedly, the Seller is sometimes the cause of extensive delays. On a current deal there was a 120 day redemption period to the Federal Government. I think there was a tax lien that had to be resolved. Seller needed to delay closing over 75 days, and buyer agreed to wait.

Another current deal was put together with a FHA financing proposed.  The appraiser had too many repairs for the deal as proposed. Buyer had to change lenders and go with a 203k renovation loan.  Buyer could have terminated the deal and renegotiated a new deal, but the asset manager approved a 30 day extension with no Buyer penalty. 

I have had Buyers walk away for "counter offers" that were merely housekeeping with no real change in terms.  It ie the market that determines how much power the Seller can exert, and how much power the Buyer has in renegotiation.

Jan 10, 2009 10:19 PM #5
Rainmaker
334,311
Andrew Monaghan
Your Phoenix Home Source - Glendale, AZ
CRS, GRI, EPro Associate Broker

many times the buyers lender is the one holding up the deal, they over promise and under deliver most if not all the time.

Buyers please understand that you sign the contract not the lender, you are responsible not them and you pay the per diem....

Jan 10, 2009 11:27 PM #6
Rainmaker
321,616
AJ Heidmann
McEnearney Associates, Inc. - Alexandria, VA
YOUR Alexandria & Arlington, VA Real Estate Expert

It still baffles me that agents work with lenders that can't hit the contract deadlines.  Here in Northern Virginia, the Regional Contract states that if the lender does not have the funds & closing packet at the settlement company on the settlement date then the buyers earnest deposit is at risk.  We counsel all our clients to use known, local lenders that understand this aspect, though we occasionally have buyers that insist on using XYZ Co. and get burned about 50% of the time.

Jan 11, 2009 08:50 AM #7
Rainmaker
334,311
Andrew Monaghan
Your Phoenix Home Source - Glendale, AZ
CRS, GRI, EPro Associate Broker

AJ, it is the same here in az but many lenders dont seem to care at all.

Jan 11, 2009 11:22 AM #8
Rainer
8,616
Ken Offidani
Coldwell Banker Select Professionals - Lancaster, PA

This is the same problem here in PA

Jan 13, 2009 09:36 AM #9
Rainmaker
710,152
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

I deal with a lot of cash buyers and I have more of an issue that the sellers can't close on time.  I've had some where the seller took 3 weeks to get the contract signed and then another 6 weeks to get the deal closed.  The buyer had cash available and could have had the whole deal done and closed within 2 weeks - instead it took a total of 9 weeks due to seller delays.  Too bad the buyer can't charge the seller the same per diem penalty because their title company and bureaucracy can't get a simple deal closed.

Jan 13, 2009 02:26 PM #10
Rainmaker
44,001
Mike Sackman
Mike Sackman Real Estate, LLC - Beaufort, SC
Broker in Charge, ABR, CDPE

I did this, and it worked! On the original contract, I wrote in the remarks that if the buyers were ready to close and the sellers delayed by no fault of the buyer, any and all fee's acrued were the respsonibility of the seller. When I received the addendum, we wrote it in there again and they signed it. Well it happend and they swallowed it.

I also have the lender sign an acknowledgement that "time is of the essence" in securing the loan due to penalties.

Jan 13, 2009 04:23 PM #11
Anonymous
Raph

I can not believe that some of you represented buyers, look like that some of you represent yourself.

From the beginning take the per diem out of the contract if you represent the buyer or have it both way (specially if a cash buyer).

Nov 15, 2010 05:48 PM #12
Anonymous
Robyn

Per diem charges and late closing fee...  Just one of the many unethical practices of the industry that have directly impacted the economic downtown of the entire country.

Jun 09, 2011 02:44 AM #13
Anonymous
hatlady

We (owners of home) have been waiting to close a re-fi for weeks. Our paperwork has all been in, appraisal done, etc. The LENDER has pushed back the closing date two times and now is charging for the latest pushback. Hmmmmm. I can understand it it were OUR fault. But it's the lender..FIFTH THIRD BANK......that doing all this dancing and dealing because they're swamped. Is that our fault? I really don't understand the penalty here. The mortgage company is absorbing it....but what is the law? (I used to be in banking...and was once a mortgage broker, but am not up on the fine print.)

Oct 26, 2011 11:52 PM #14
Anonymous
Myra Rubinstein

We are in contract to purchase a house in the Outer Banks of North Carolina.  We did everything required of us and were ready to close on Friday November 2.  But we were told that the closing now must be delayed until November 15 to allow for a reappraisal and that in addition to a reappraisal fee they are raising our points from 1/8 point to 1/2 point (4x the points!) .  

Why should we be penalized for a weather delay that is TOTALLY not our fault?  We were ready to close by the deadline.

Nov 05, 2012 08:38 AM #15
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