Automatic Extension of the Closing Date? Not So Fast My Friend!

As many of you have seen over the past year or so, buyers are increasingly using the “up to 10 day extension” provided for in Paragraph 5(a) of the FAR/BAR contract to extend the closing date.  The issue is that the buyer mistakenly believes that the extension is automatic if their lender is not ready to close.  This is simply not the case.  Even more troubling, we have seen numerous examples of lenders trying to use the extension on behalf of buyers well in advance of the closing date and in turn well in advance of any CFPB delivery requirements coming due.   How could the CFPB delivery requirement be an issue if the closing date is further than 3 days out?

In October of 2015 the Consumer Financial Protection Bureau (“CFPB”) implemented the TILA RESPA Integrated Disclosure (“TRID”) rule.  In response, the FAR/BAR committee amended the FAR/BAR contract (“Contract”) so that the Contract could adapt and conform to the new TRID rules.  One of the many Contract modifications that resulted from TRID was the change to Paragraph 5(a), Extension of Closing Date, which was modified so that the closing date could be extended for a period up to 10 days if the closing funds from the buyer’s lender were not available on the closing date due to the CFPB closing disclosure delivery requirements (“CFPB Requirements”).

At this point you may be asking why the cause for concern?  The answer is that the FAR/BAR committee was very specific in the language they used when revising the Contract.  Specifically, the extension is only available if the lender’s funds are not available on the closing date due to the CFPB delivery requirements. This does not mean that the extension is available because the buyer’s lender is simply not ready to close by the closing date.  Unfortunately, a buyer who mistakenly believes that they have an automatic extension may be running the risk of a material  contract default by letting the closing date lapse without first securing an extension amendment.

Obviously, it is critical to understand the reason for the delay in funding by the lender before trying to claim that the extension provided for in Paragraph 5(a) should automatically kick in. The prudent thing will always be to secure an amendment extending the closing date and only using the extension language as a last resort.  As always, we suggest that you contact your local real estate attorney should you have any questions regarding the extension language or the use of the extension.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Will McComb, Esq. wmccomb@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

www.berlinpatten.com  

SARASOTA

3700 South Tamiami Trail, Suite 200, Sarasota, FL 34239   P (941) 954-9991  F (941) 954-9992

VENICE

247 Tamiami Trail South, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

Did you find this real estate law content useful, but need actual legal council?

Speak to a real estate attorney!

, , ,

Am I Bound or Can I Entertain Other Offers?

“Do I have a valid agreement or can I entertain other offers?” In this day and age, this a question that is becoming increasingly prevalent.  For example, you receive a call from a buyer’s agent and the agent indicates that their client has agreed to buy your listing at full price, with no contingencies, closing…

Don’t Cry Over Burnt Turkey!

In honor of Thanksgiving, we have a holiday themed fact pattern.  Buyers and Sellers are set to close on a property the Monday after Thanksgiving.  On Thanksgiving, the Sellers have their friends and family over for one last holiday dinner in the house.  Sellers also decide this will be the first year they try to…

Escrow Agents & Deposit Deadlines – Show Me the Money!

How many times do you see contracts with the Escrow Agent section blank or TBD inserted on the line for Escrow Agent?  Do Buyers always make their deposit(s) by the Deposit Deadlines?  This blog will address the Escrow Agent and Deposit Sections under the FR/BAR Residential Contract (the “Contract”) and assume the buyer’s agent is…

Tips to Take the “Fright” Out of the FR/BAR Contract Under New CFPB Rules

We know people seem to be spooked by  the new Consumer Financial Protection Bureau (“CFPB”) requirements that went into effect October 3, 2015.  Never fear, we have some helpful timeline tricks for your Halloween treat this year: Loan Application.  To insure that the Loan Application requirements are met, the Buyer has 5 days after the…
Menu