Cindy:

It is my understanding that anything that a buyer and seller agree to in a written real estate contract can be enforced. It is also my understanding that if you are getting an FHA loan, FHA does not allow the bank to charge a per diem fee for late closings, and therefore most banks incorporate this terminology into their addendums. Of course, if you have been told it is "illegal" then that is a question of law that would require an attorney's response. Speak with your broker or their legal counsel on this point.

Since laws vary from state to state I would suggest asking a real estate attorney.