How far out can I set my closing date?

You’re looking to sell your home, but you’re worried about the closing date. What if your home sells quickly? Maybe you are trying to time your sale to coincide with the purchase of another house, or maybe you just want to give yourself time to move or find another house. Many sellers want to build some flexibility into the process to meet these needs, but depending on the situation and length of time involved, it can be a bad idea.

Normal closing times

close on houseA typical closing time is dictated by how long the mortgage process takes for a buyer. Because getting a mortgage involves applying for a loan, an appraisal and multiple underwriting steps, the mortgage process for your buyer determines how much time you need to allow for closing. At the moment, we are seeing 30-45 day closings to be typical in Seattle. Cash buyers have much more flexibility and could close in a matter of days once the inspection and title insurance is complete.

Don’t try to be too aggressive on a short closing of <30 days unless you have the utmost confidence that a lender can get the loan done early. (Most of them cannot.)

Lengthy closings can kill a deal

Buyers can be a fickle bunch. If a buyer thinks they are closing on your house in 30 days, they’ll probably stop looking at other houses. However, if you ask them to close in 90 days, I can pretty much guarantee that they will still be in “home shopping mode.” If they find something that they like better while they wait for your house, they could back out on you. In fact, if the other property is appealing enough, they may even be willing to part with their earnest money to switch homes.

More time gives more opportunity for something to go wrong with the buyer’s personal situation as well. Maybe they lose their job, get transferred for work or have to deal with a family illness. All of these reasons can kill your deal and put you back on the market looking for a new buyer. (We’ve experienced all three of these with our clients.)

The bottom line is that every day you let go by adds an element of risk to a successful closing, so keep it short and get it closed.

Be aware of mortgage rate locks

Your buyer is likely going to want to lock in their mortgage rate, especially with rates as low as they are right now. Typically, lenders will allow a 30-day rate lock at no cost. If your buyer needs a 60 or 90-day rate lock to meet your closing schedule, that is going to cost money. In fact, it can cost quite a bit of money, or may not even be available for very long time frames.

It only takes one day of crazy global events to send mortgage rates into a tizzy, and a sudden spike in rates could cause you to lose your deal. If you are looking for an abnormally long closing time, you may even want to offer concessions for the buyer to purchase a long-term rate lock.

Rent backs can be messy

One option home sellers may ask for is the ability to rent back their home for a few days or a few weeks after closing. This may sound like a great idea to a seller, but a buyer isn’t going to be so keen on it. Obviously it introduces a bunch of new liability for the buyer. What happens if the house burns down during the 2-week rent back? Or what if there is a pipe burst with massive damage? The buyer needs to make sure they are protected with their own insurance, and there needs to be some sort of lease agreement in place that dictates the terms of the rental. A buyer’s recourse if something goes wrong with the house prior to closing is to halt the closing. Once closing has occurred, all of the money is given to the seller and the buyer is left with little recourse other than costly legal proceedings.

On a more basic level, buying a home is exciting. No one likes delayed gratification. How would you feel if you took every penny out of your savings, went down to the car dealership and bought a fancy new car on the lot, only to be told to come and pick it up 30 days from now? Did I mention that the car is going to sit in the lot for those 30 days so you can drive by and look at it but not touch it? Same principle applies here. The savvy home seller caters to this basic emotion, even if it means they have to seek temporary housing for a bit after their sale.

Strategies for home sellers

The goal for every home seller is to get the most money for their house with the least amount of hassle and risk. The way to achieve this is to cater to what buyers are looking for and keep your closing time short. There are scenarios when asking for a short rent back or particular closing date makes sense, but use that request sparingly and recognize that requests for abnormally long closing terms are going to shrink your pool of potential buyers and introduce more risk to your sale.

  • Pushing back your closing time not only makes you lose a buyer, but it also means the house will be staying on the market longer, which might cause it to lose value over time. Always make sure that you have a back-up plan once you close.

  • Pepper

    I wish the question had been answered. How far out can you go?

    • Gabriel Luci

      The answer really is that there is no limit. It’s all about what the buyer and seller agree to. If you want a closing date 1 year from now, you can do it, but only if the other party agrees. The further in the future you go, the less likely it is that they’ll agree.