Another Real Estate question

[malkin]

We made another offer, and got the counter...

Seller is ok on price, but wants to delay closing until June while keeping the Due Diligence deadline in Mid-April.

Clearly seller wants to stay in the house until June--I get that---but I'm wondering about other disadvantages for us as buyers.

What do you think?

[indysteel]

The biggest downside to delaying closing is that your lender (assuming you're financing) likely won't lock in your rate for that long and, if it will, it might charge you a higher fee to do so. That isn't necessarily a bad thing if rates are dropping, but if they're creeping up--as I think they are now--then it could be a problem.

Beyond that, if you have the home inspected in April and then something happens to the home in May--say some flooding from spring rains--then you might not be the wiser. If you do delay the closing, then I would ask for the right to do a walk through of the house a week or two prior to closing.

Would you incur any extra costs by having to delay closing, e.g., storage fees or the like? If so, then you might consider asking the seller to bear or share those costs.

I'm sure there are other potential issues, but that's what comes to my mind most readily.

[shootingstar]

I locked into a rate after signing on dotted line as the purchaser. But had financing figured out. All this about 2 months before I take possession and we move in.

Maybe things are different up here in Canada. I've been a long-time bank customer for a particular bank ...since university.

[Trek420]

I've heard of closing being delayed pending a seller having a new home, or the buyer selling their home. I've even read a seller having nowhere to go yet renting a room or rooms of their previous home from the buyer till they can leave.

I'm sure if you want to move in before June you can work something out. If not, time will fly. Meanwhile more time to inspect and plan.

[Koronin]

I would push the due-diligence date back. We just closed on a house this past week. Although did not encounter what you are with this. Actually the sellers offered to be out sooner and would let us start to move in before we closed.
When I sold my house last year, I specifically stated I would not be out before the end of June and would not accept a closing date before late June no matter what. I'd put the house up for sale in April, but had no place to move to until late May. (Hubby was already here, but until I could get a weekend plus a couple of days, couldn't do anything about finding a place to rent. Yes that POed me that I had to find a place to rent from 5 hours away. Thankfully I found an awesome realtor here to help and went back to her when we decided to see about buying a house). The closing date ended up being 2 days after I got everything moved. I am so very grateful to my parents for coming down from Ohio to help. I truly do not know what I would have done without them. They are coming down again for our new house, but not to help move. They are coming to help paint. I MUST repaint the kitchen and laundry room before we move in. They are hot pink. I hate pink to being with and must have those repainted. Also repainting two other rooms. We don't need to move right away as our lease is through the end of May. So we are going to take our time to move.

Sorry the above got so long. I agree with the indysteel. You may not be able to lock in a rate for that long. Now with an inspection, the bank (from my understanding) requires it to be done within a certain amount of time before closing. So if you get an inspection say in April, you'd have to get another one within (I think) 3 weeks of closing.

[Mr. Bloom]

I do believe you'll find difficulty locking a mortgage rate this far in advance...or the cost may be higher to do so.

However, the mortgage lender may still allow you to close earlier and have a rent arrangement with the seller keeping them in the house until June. You have ownership, they have occupancy. If you pursue this, you need to have terms of responsibility well defined: you insure the structure - but not their contents, they're responsible for damage they create, general liability issues should well defined, have the "rent" paid in advance from their net proceeds (don't let them simply reduce the price...the out of pocket impact to you is different - perhaps they can pay closing costs in lieu of rent??), etc. The situation will determine whether or not this is possible; the mortgage lending market is still puckered tight.

I'm in a similar position where I am about to market a property that I cannot sell before June 1 for tax reasons...this is my PLAN B is someone simply needs a place to be in before then...

Keep us posted

[Crankin]

We've locked in our rate, more than 2 months ahead twice and did a rent-to-own for 4 months once, and it was fine. Our real estate agent was key in helping to broker these deals.

[malkin]

Thanks everybody!

We talked to the lender--no problem there.

Got a little more info from the sellers' agent. I don't need to repeat our conjecture about their situation, but it doesn't appear to be love and roses. There seems to be tense communication between Mr. & Mrs. Seller, one of whom is out of state. Their agent is good.

We're under contract.

[Mr. Bloom]

This is good...I don't want to second guess, but I'm highly confident that you will face either a higher rate or higher fees to get a 90 day lock. The industry is currently operating on a 30/45 day lock scenario. Deviation usually has a price...

I encourage you to confirm this on an apples/apples basis with the lender just to be safe...

[smilingcat]

Get in writing and not just a verbal confirmation. Last thing you want is a SURPRISE!!!

Good agent/broker will know what to do:

you can buy now and lease back on month to month with firm "exit" date. Some state will allow you to lease back for thirty days without creating a tenant-landlord relationship. Tenant-landlord relationship will put more burden on you. If they decide not to move out then you have to go through the eviction process. Without the relationship, you can just boot them out after the thirty days.

The lease back generally involves some nominal per day rental fee (typically monthly mortgage divided by 30). Again its set so that its not based on monthly rate. This is the norm instead of lowering the selling price. I think there are some legal reason for doing this.

Do check with your agent and broker on how to do this in your state. Milage will vary!!

smilingcat

[Susie Derkins]

We had a similar situation. We bought our house a couple years ago, and went under contract in May for a September closing. The sellers were building their new home, and didn't want to move out until the new one was ready.

All of our time lines were standard (inspection, mortgage approval, etc.), we just spent a lot of extra time hanging out and waiting in between approval and closing. Since our mortgage commitment was only good for 60 days, we had to redo it several times. Rates were going up that summer, so we did suffer a fraction of a percentage point for it. It was a PITA, but we wanted the house.

One option that I haven't seen suggested is that you could close in a standard time frame, and then rent the house back to your sellers until June. We opted not to for a variety of reasons, but it can work. If you do it, make sure you have a full lease agreement drawn up, with everything spelled out to protect you. Talk to your attorney about it before taking any steps, and if you do it, have your attorney draw up the lease. One thing to be aware of is that some homeowners' insurance policies require the house to be owner-occupied, so you'll want to check on that too.

Given how much harder and more rigorous the financing process is now than in 2008 when we bought (we experienced it in 2010 when we refi'ed), I'd probably look harder at this option were we doing it now, just to get the deal closed.