Trying to buy a house but everythig is terrible and nothing is good.
September 16, 2019 7:02 PM   Subscribe

I'm buying a house but my mortgage is about to expire and the seller keeps pushing the closing date! What do I do?

I am in the process of buying my first house. When I signed the contract of sale, it said closing would be "on or about" August 26th. HOWEVER, the seller is also buying a house to move into, and the contract says closing must be scheduled to coincide with the closing of Seller's purchase.

When I secured my mortgage, the rate lock was to expire September 16th which seemed to be more than enough time, since closing would be in late August. Now here we are on September 16th and the Seller's new house suddenly has all these code problems that have to be fixed first. So conceivably she wont be able to close on that one until mid-october! Which means I can't close until mid-October!

The problem I have now is that the bank will charge me $115 a day starting tomorrow until I close. My entire mortgage is only $700 a month, and yet they'll charge me $115 a day until I close. It's insane. The seller refuses to pay this fee because the contract says I can't close until she does. But the contract also says we'd close back in August!

I cannot afford thousands of dollars in bank fees. The bank says I should force my attorney to fight with the seller's attorney and insist she pays the fees. My attorney says I should force the bank to waive the fees. I'm freaking out and dont know what to do.

My options as I see them are:

1. Rack up the bank fees and hope the seller clears up her new house problem so we can simultaneously close. NO GOOD. I can't afford this.

2. Keep hammering on my attorney to fight with the seller and force her to pay the fees. NO GOOD. She's already said she wont and, despite the self-contradicting contract of sale, I dont think we can convince her to pay.

3. Keep begging the bank to waive the fees. NO GOOD. I mean.... dont they have to adhere to government rules on rate locks? Surely they cant keep a loan active indefinitely?

4. Um....let my mortgage go and start a whole new one with a different bank? I'd be out the $1000 or so I've already paid in appraisal and fees, plus I'd have to start from scratch which means it would take at least another 45 days to get a new loan. Then I would be too late for the seller's closing and maybe the whole sale would be forfeit. NO GOOD

5. The bank said I could re-commit to a "float loan" which I guess means whatever day I close, thats the rate I get. But it cant be BETTER than my current rate-locked rate, and it can definitely be worse. I dont know, this sounds like I could end up really badly off.

6. My attorney suggested I close immediately and offer to let the seller live in the house until her closing. She would pay rent, and a pro-rate of the insurance, taxes, utilities, etc until whenever she closes her house and gets out. EVERYONE is telling me NOT to do this and that it would be a huge mistake.

What is the best of the of the truly truly awful choices I've listed above? Is there another solution I'm not thinking of? Help! I just want my house!
posted by silverstatue to Home & Garden (26 answers total) 2 users marked this as a favorite
Why are people telling you not to do #6? That’s a common thing.
posted by valeries at 7:05 PM on September 16, 2019 [34 favorites]

Yes. Close now and change the possession date, It's not uncommon. Her refusal to close on this house until she has closed on her next house is unreasonable and not common. So close now and set a date for possession--just make it a DATE and not "when she gets around to closing her other deal".
posted by crush at 7:12 PM on September 16, 2019 [5 favorites]

#6 is the thing I have always heard of people doing in this exact situation.
posted by fancypants at 7:20 PM on September 16, 2019 [4 favorites]

#6 is a very common thing. You can even potentially charge her rent for the time she maintains occupancy after closing. Although in hot real estate markets sellers can get this for free (ask me how I know...).

Failing that, I know this is hard, but can you walk away? Are you able to get out of the contract based on the closing slipping, and still get your earnest money back?
posted by handful of rain at 7:28 PM on September 16, 2019 [1 favorite]

Do #6 and never look back. I nearly ended up in this situation with a recent home purchase and my realtor advised me that #6 would be the best option, telling me horror stories about buyers who went with options 1, 2, or 4. Unless there's something really wrong with the way your purchase contract is written, this isn't some sort of squatter's rights situation (although IANAL); just have an actual concrete date for your possession on your purchase contract and you're good.

The only way this could get complicated is if your lender requires that the property is owner occupied/not rented as a condition of releasing funding. AFAIK, this only becomes a problem if your mortgage lender is kinda ridiculous (sadly, mine is). This is usually something a good real estate lawyer can figure out easily.

Moving up your closing date is usually less of a dumpster fire than other options. Just have the house occupied by someone (the seller, in this case) as to not piss off your insurance company.

Also, #4 may prevent you from closing at all and may void your purchase agreement - check the fine print on this one.
posted by blerghamot at 7:43 PM on September 16, 2019 [1 favorite]

#6 includes the risk that the seller doesn't move out. How tenant-friendly is your jurisdiction? If you want to evict a tenant who's paying rent, how long would that take?
posted by Hatashran at 7:48 PM on September 16, 2019 [2 favorites]

Just popping in to say I can't walk away. I love the house. It's the most amazing, perfect house.

But I would definitely charge her to live there. She has to at least pay the share of taxes, insurance, utilities, etc while she's there! The reason people are urging me NOT to let her stay on is because they're afraid she won't leave, and then I'll end up having to evict her.

On preview, yeah, Hatashran, that's what everyone is afraid of -- that she won't leave. It's NY so, very tenant friendly
posted by silverstatue at 7:56 PM on September 16, 2019

Talk to your lawyer. Maybe there is a way that you can build specific $ penalties for a failure to vacate on time - presumably high enough that she will have a strong incentive to leave. Obviously her preference is to stay until her new house is ready, however long that takes. (So, she won't want to stay forever, just for longer than you would like. However you want to protect yourself in case the sale of the new house falls through and she no longer wants to move. )Also ask about including a security deposit. If it is no longer her house, she won't have the incentive to keep it in good shape and any damage will be your problem once the sale closes.
posted by metahawk at 8:05 PM on September 16, 2019 [1 favorite]

I see you're in NY - from my limited experience, 'on or about' in NY basically means up to 30 days from the date from either party. So practically, the contract means up to September 26th. That sucks, I know, but it's probably why #2 is not going to happen (within reason - the seller can't go to November, but 30 days is sadly common). Mid-October is too long without them giving you some concessions.

I would eliminate #4 right away. It's the most expensive, and the most likely to lose the house.

For #3 and #5 - it might not be as bad as you think, assuming it's your rate lock expiring, not your mortgage. Your bank has options here, and you should push them on ALL of them. In order to pick the best one you need to know: (1) what the float rate is as of today - rates are still quite low, it could be the same as your lock even. Floating rates don't move that quickly, it could go up a bit or down a bit in 10 days, but as long as the bank would approve you if the rate goes up a bit and you are ok with the resulting monthly payment, it's an option. (2) will they extend the rate lock 15, 30, 60, or 90 days, and what would it cost you to do that? These are things banks do, and you should know your options. Once you have a few options as to dates and costs you can go to the next step.

For #6 - people are warning you because it CAN be a huge mistake, and the only time anyone ever hears about it is when it goes badly. It's not uncommon, but can go wrong (dealing with insurance , if they don't want to move out, etc), but in this case where you have a motivated seller it may be your best option. The phrase you're looking for searching is "post-close posession".

I am not your lawyer, but if it were me, I would do the following: (1) Your lawyer should push them to close on the nearest business day after September 26th - that's when their 'on or about' would expire by conventional interpretation. You can offer (#6) to them if you are comfortable with it; if they want to maintain possession after the close, or alternatively your lawyer should ask for them to pay the fee (#2) after that date based on the information you got from the bank. Both of those are reasonable starting points for negotiation. If you really would walk away from the contract, you can threaten that as well. The seller almost certainly does not want that.

In the meantime, you should ask those bank questions above. It really depends on the bank, but there is almost certainly at least one "not 100 dollars a day" bank-based solution.

Also, this will almost certainly get better. I have had at least one moment in every house purchase where I've thought that everything was the absolute worst and there was no way out. And some of them I've had to really really fight through, but they worked out in the end.
posted by true at 8:07 PM on September 16, 2019 [6 favorites]

Where is your broker (not the seller's) in all this? You should follow their advice. They have experience and a strong financial incentive for you to succeed. A good one should get on the phone with the seller's broker, your mortgage officer, anyone it takes to close the sale.

Do you or the seller have any contingencies pending?

I'm doing #6 right now. It's fine. It's called a leaseback. Mine is 2 months. The seller is responsible for utilities. This seller seems a little weird, and they would be your tenant, and that's a good reason to be nervous about it. But without you saying why "everyone" is telling you not to do it, it's difficult to say more. It's not at all unusual.

FWIW you have time for #4. I mortgage shopped after my offer was accepted (i.e. I went through the process you describe in #4, although for different reasons). I applied, appraised and closed with a brand new bank in less than 20 days. I was out the cost of two appraisals.
posted by caek at 8:13 PM on September 16, 2019 [2 favorites]

I did #6- for an entire summer. The seller was a demonstrably reasonable person, however, and was having problems with delays in the building of her house. We wrote a lease, she was bound by its terms, it was fine. Do you trust your seller?
posted by charmedimsure at 8:16 PM on September 16, 2019

We did #6 with a reasonable seller and it was easy peasy.
posted by matildaben at 8:59 PM on September 16, 2019 [1 favorite]

Listen to your attorney and do what your attorney says.
posted by internet fraud detective squad, station number 9 at 9:02 PM on September 16, 2019 [3 favorites]

Is number six an option? Who are the people telling you not to do it? Because it’s quite common exactly for this reason. Who is EVERYONE?!
posted by bluedaisy at 9:38 PM on September 16, 2019 [1 favorite]

I did #6 as the seller, for five whole months, and it was a life saver. Our daughter was born there while we remodeled the house we were moving into. The buyer was fine with it because he was planning to tear the place down anyway and needed to do permitting, plans, survey etc so it would've been sitting vacant otherwise so at least this way he was earning money on it, and we were SO grateful we let all his contractors on the property anytime.

If she seems like the type who would refuse to leave you may well consider this a bad idea. But she may very well just be in a panic about not having anywhere to go if you close, and not aware a leaseback is an option. I'd float the idea, at least.
posted by potrzebie at 9:46 PM on September 16, 2019 [1 favorite]

The seller is not being unreasonable and wants to move. They are working through the code violations, yes? This to me reads as a serious person. #6 is so many light years beyond the other options.
posted by OnTheLastCastle at 9:55 PM on September 16, 2019 [3 favorites]

We did #6 with a reasonable seller and it was easy peasy.

This was our experience also.
posted by Dip Flash at 10:13 PM on September 16, 2019

#5 and #6 seem to be your only options. You've ruled everything else out, you wont let the house go, you wont let the mortgage go and you wont pay the fees to keep the mortgage extended. Whether #5 is doable depends on how different the rate is

#6 might go bad, and you'll have to evict her but your other options are definitely bad. You can't afford to pay the bank fees and you can't wait to get a new mortgage (plus you'd have to pay all those fees again). You don't want to just let this house go (plus finding a new place still means finding a new mortgage etc)
posted by missmagenta at 4:19 AM on September 17, 2019

We did #6 for two months as sellers of a condo until our new house was vacated. The woman selling our new house was completing chemotherapy and wanted to finish that round.

Meanwhile, we had to pack up and put our stuff in storage, essentially moving twice - with an infant and two dogs over Christmas and New Years in NYC. It sucked, but we got over it. The buyers of our condo were incredibly gracious about letting us stay there, and would've let us stay longer, but the husband was starting a Fellowship.

If I recall, we had it all in writing as to what the agreement was regarding timing, finances, etc. - our attorneys worked it out. This was 16yrs ago this coming November. If there ever was such thing as karma, the husband ended up being my anesthesiologist for surgery about five years ago. Small world!

I say as long as you have it all in writing, go for #6.

The house owner was a real nightmare and wanted to stay for three months, not just two. She was the seller and broker in our particular situation. We ended up having to sublet an apartment in NYC over Christmas and New Years for two weeks, plus stay in a hotel in Weehawken before moving into the house. But that's an entirely different story. Just get it ALL in writing and don't let the homeowner have any wiggle room.
posted by dancinglamb at 4:55 AM on September 17, 2019 [1 favorite]

We did #6 -- it was painless and helped us immensely (only 1 month of a vacant house instead of 3!). Our sellers paid rent/utilities/insurance, moved out promptly with no issues, and left the place clean. A+, will do this as the sellers whenever we move!
posted by Bebo at 5:20 AM on September 17, 2019 [1 favorite]

I had to do #6 when I was forced to sell in 2005, payed “rent” on my old house for a week before I could get into a rental. The jackass who bought my place even managed to wrangle $700 in carpet cleaning fees out of me for all the “wear and tear” I did during that week of renting. Sucked.
posted by porn in the woods at 6:02 AM on September 17, 2019

I am literally about to do #6 - closing on Thursday, and our sellers are closing shortly after. Obviously we'll see, but all the professionals in our sale had no concerns. And the sellers are paying rent for the duration. Unless YOU need to move before they leave, it's probably fine. Another thing to check with your agent and attorney - in our state and locality, post-sale possession is legally different from a standard landlord-tenant situation, and the sellers don't have tenancy rights. Crucially, that means no eviction process; if they don't leave by the agreed upon date, it's legally considered trespass.
posted by bowtiesarecool at 6:03 AM on September 17, 2019 [2 favorites]

Chiming in to advocate for #6, which I have also done. A friend of mine just finished a stint of lease-back, where the seller gave rental terms that looked like "$1000/month for the first two months, then immediate escalation to $500/day for any duration thereafter" to make good and sure that occupancy beyond a very tightly defined window would be disastrously expensive. You'd have to check to see if terms like that are enforceable in NY, but even if they're not, I've never personally heard of anyone having problems going the #6 route.
posted by Mayor West at 6:13 AM on September 17, 2019 [2 favorites]

Thanks everyone! I work in property management and have had TONS of problems getting bad tenants out of apartments, so that is why my peers and colleagues are so hesitant of #6. They are afraid she will never leave. But it looks like that is still my best bet, and I will just hope for the best.
posted by silverstatue at 7:54 AM on September 17, 2019 [1 favorite]

#6 is a really common solution to this problem. I've done it before. I'm an attorney and have a real estate license in two states. I would do it again in the future without hesitation. It can make things easier.
Mayor West has it right in saying you want the occupancy to be for a small window. In your state, they may not have any tenancy rights at all even if they stay too long, so it's not like being a normal landlord. This is something your attorney should be able to counsel you on.
posted by zdravo at 6:50 PM on September 17, 2019 [1 favorite]

Just to check back in - hope everything went okay! We did indeed get everything on time with no issue; our sellers moved promptly with no surprises, and we are now happily spending our weekends at Home Depot. The seller contributed a few days of rent at closing and the security deposit was managed entirely by the escrow company, so all we had to do was sign a form to allow the escrow people to release it once we took possession and checked that it was in the same condition. Hope your closing and possession are just as smooth!
posted by bowtiesarecool at 5:11 AM on September 29, 2019

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