Home Buying in 22311>Question Details

M, Home Buyer in Alexandria, VA

Delayed Closing

Asked by M, Alexandria, VA Thu Sep 25, 2008

I am buying a bank owned house. We were supposed to close in the end of September. The closing is getting delayed and delayed due to extremely slow responses and unprofessionalism on the seller's side. Example: the bank that is giving me the loan asked for a seller's affidavit two weeks ago and then repeated the request several times - through my agent and directly. We still do not have the requested document. This is just one example. Due to all these delays, we will not be able to close in September and at the closing, I will be paying about 30 days worth of interest (closing in the beginning of October) as opposed to several days worth of interest (closing in the end of September). I intend to request reimbursement from the seller. Have there been precedents? What are my legal options?

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M. There really isn't anything to reimburse...and please, someone correct me if I'm explaining this wrong .
It's either pay now or pay later when you are closing on a property. If you close the beginning of October and pay nearly a month's worth of prepaid interest, that will push your first mortgage payment to the begining of December . If you close near the end of September and pay 1 day of prepaid interest, your first payment will be due the beginning of November. If you get the bank to reimburse you for the extra prepaid interest at the time of closing due to the delay, are you going to give them that money back when you don't have to start paying your mortgage in November? Interest on a mortgage is paid in arrears. In the first situation, that first payment in December is paying November's interest. Since there is no payment made in November, your mortgage company needs you to pay that interest for October at closing - ahead of time. That's why you are paying 'prepaid' interest on a loan where the interest is paid in arrears :) It's really just a matter of your availability of money and whether you can afford to come up with the extra money for prepaids at the time of closing or if you are short of money and need to budget that into the following month. That's why a few good faith estimates with varying closing dates is important. If your contract says that you are supposed to be closing the end of September and your budget will only allow that because you don't have the prepaid interest to push out your first payment, then you need to rethink your purchase - and I'm assuming that you did not use agent to guide you through your options there...

Also, when you sell or refinance this property, you are most likely going to have to pay that 'out of mortgage payment' interest again! If you sell your home 5 years from now on the 15th of September, you will owe your bank the interest acrrued from the 1st to the 15th of September since you have yet paid your October payment. That's why your 'balance' on your loan is often different than your 'payoff'. Your agent should have, as a standard part of their listing package, a net sheet that has an area that figures in your estimate for the difference. It's probably safe to figure in at least 1/2, if not one complete mortgage payment as a possible addition to your loan payoff when selling. If the idea of prepaid interest is killing your buying budget now, you need to know that your seller proceeds that you receive at this later date will be affected the same way.

Since you asked about your legal options, I will cover myself by saying that if you feel the need to seek out the advice of an attorney, please do.
0 votes Thank Flag Link Sat Sep 27, 2008
I would say your chances of getting reimbursement from the bank is slim to none. I can't even get the bank-owned seller to pay for items they customarily should pay for. Generally, if it's not spelled out clearly in the contract/addendums that the seller will pay, then it's an uphill battle. As far as the document your lender requested, if it isn't addressed in the contract that the seller has to comply with the request, I wouldn't be looking for it anytime soon. I've had settlements delayed 1-2 months with banks as the seller....if you were supposed to close the end of Sep and you're closing early Oct, that's not too bad all things considered.

Like others said, concentrate on the fact that you're getting a below market price. It might help to take a stroll through the house with your agent again so you can remember what all this aggravation is for. Take measurements, pictures, make plans, anything to stay focused on your end goal. Good luck to you :)
0 votes Thank Flag Link Sat Sep 27, 2008
M, call your lender and have them explain to you about the relationship between when you close, your pre-paid interest and how that determines when you make your first mortgage payment. You may be coming up with more money upfront, but you may also be skipping an extra month's payment because of it. Also, depending on how far into the beginning of the month you are rescheduled to close, your lender may be able to restructure your upfront interest so you only pay a few days instead of, say, 27 days worth. Call them, they can explain that to you.
0 votes Thank Flag Link Sat Sep 27, 2008
This is typical when buying a bank owned property. The process takes a long time and the odds are you will have similar delays if you bail from this property to pursue another bank owned one. The seller is the Bank. The Bank is not going to reimburse you because you now have more odd days interest to pay. It's their property their giving away, and buyers have to be patient and play by their rules... otherwise, don't pursue a BANK owned property.
0 votes Thank Flag Link Fri Sep 26, 2008
Issues with purchasing Bank Owned properties are common. Slow and unresponsive banks/sellers is part of problem with the whole Housing market - but there is little you or your agent can typically do. You have to just feel good that your (under-priced) home comes at a price; not monetary but frustration.
0 votes Thank Flag Link Thu Sep 25, 2008
I understand your frustration with the slow process of purchsing a foreclosed property. Unfortunately, based on my experience, as a Realtor, there is little you can do. In all cases I have worked with, the lender/bank has an addendum to the sales contract that protects them from having to pay any fees for delayed settlements. Hopefully you are getting a good value in the home you are purchasing and that will offset the extra cash you will need to pay.
Also, if you were to close at the end of September you would pay only a few days interest charges and make your first mortgage payment on 11/1/08.... if you settle in Octomber you will have to pay interest charges through the end of the month, but your first morgage payment will not be due until 12/01/08. I know is just the thought of bringing more money to the table that matters to most buyers, but if everythign else fits in place it may not be worth your expense of paying an attorney. Of course you have that option but first compare your cost of hiring an attorney vs. paying the extra interest up front.

I am not discouraging you from contacting an attorney, I am merely giving you my thoughts based on my experience.

I wish you the best and I hope you enjoy your new home.
0 votes Thank Flag Link Thu Sep 25, 2008
This is an attorney question. Every state has different real estate laws regarding foreclosures. Did you buy the home on the courthouse steps? Is it bank owned? It is not rare for a bank owned property to take several weeks to negotiate, so closing can take even longer....If it is bank loaned, inquire about their loan process....
0 votes Thank Flag Link Thu Sep 25, 2008
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