Compensation for Delayed Closing in Real Estate Transactions: Causes, Options, and Tips

Compensation for delayed closing is an important consideration in real estate transactions. When unforeseen circumstances cause a delay in the transfer of ownership, both buyers and sellers can experience inconveniences and financial losses. Understanding the concept of delayed closing and the factors that contribute to it is crucial for navigating this complex process. In this article, we will explore the various scenarios that can lead to a delayed closing and delve into the calculation of compensation for such delays. Additionally, we will discuss examples of compensation and offer practical tips on how to minimize the risk of delays and ensure a smooth closing experience for all parties involved.

What is delayed closing?

Delayed closing is when the transfer of ownership of a property does not happen on the scheduled closing date. The closing date is the date specified in the purchase agreement when the buyer pays the seller the balance of the purchase price and receives the title and keys to the property.

There are many reasons why a closing may be delayed, such as:

  • Problems with financing or appraisal
  • Issues with title or survey
  • Inspections or repairs not completed
  • Legal or contractual disputes
  • Force majeure events such as natural disasters, strikes, or pandemics

Parties can mutually extend closing date or seek compensation/remedies depending on delay nature and severity, based on agreement.

What happens if closing is delayed by seller?

  1. The buyer may need to renegotiate the closing date with the seller to meet their needs.
  2. Buyer may incur additional expenses, such as storage fees or temporary housing costs if the delay causes them to miss their move-in date.
  3. Buyer can sue seller for specific performance or damages if seller refuses to sell and engages in deceptive tactics.
  4. Seller can cancel contract if buyer isn’t ready to close by specified date, subject to certain conditions.
  5. Seller may charge buyer daily rate for inconvenience and expenses due to delay in closing, potentially increasing costs.

How is compensation for delayed closing calculated?

Compensation for delayed closing is usually based on the actual damages or losses suffered by the aggrieved party as a result of the delay. These may include:

  • Additional living expenses such as rent, hotel, or storage fees
  • Additional mortgage payments or interest charges
  • Loss of income or business opportunities
  • Legal fees or penalties

The amount and method of compensation may vary depending on the terms of the purchase agreement, the type of property, and the laws of the state where the property is located. Some purchase agreements may include clauses that specify how compensation for delayed closing will be determined or limited. For example, some agreements may provide for liquidated damages, which are a fixed amount agreed upon by the parties in advance as a reasonable estimate of their potential losses in case of a delay. Other agreements may allow for specific performance, which is a court order that requires the defaulting party to complete the transaction as agreed.

What are some examples of compensation for delayed closing?

Here are some examples of how compensation for delayed closing may be applied in different situations:

  • If a buyer fails to close on time due to financing issues, the seller may charge a per diem penalty to cover their additional mortgage, tax, and insurance payments. The seller may also have the right to terminate the contract and keep the earnest money deposit as liquidated damages.
  • If a seller fails to close on time due to title issues, the buyer may claim reimbursement for their additional living expenses and legal fees. The buyer may also have the option to cancel the contract and get their earnest money deposit back.
  • If a new home construction is delayed beyond 240 days after the firm closing date due to unavoidable delays such as weather or labor shortages, the builder must set a delayed closing date and pay up to $150 a day for living expenses and other legitimate expenses to the homeowner. The homeowner may also have the right to terminate the contract and receive a full refund.

How can delayed closing be avoided or minimized?

Delayed closing can be costly and stressful for both buyers and sellers. Therefore, it is advisable to take some steps to avoid or minimize the risk of delays, such as:

  • Reviewing and understanding the purchase agreement and its contingencies
  • Obtaining pre-approval for financing and appraisal
  • Conducting due diligence on title and survey
  • Completing inspections and repairs promptly
  • Communicating clearly and frequently with all parties involved
  • Hiring experienced professionals such as real estate agents, attorneys, appraisers, inspectors, and movers

What Types of Costs Can Be Compensated?

The types of costs that can be compensated for a delayed closing vary depending on the circumstances. However, some common costs that may be compensated include:

  • Mortgage payments: If the buyer has to continue paying mortgage payments on the property after the closing date, they may be entitled to compensation for those payments.
  • Taxes: If the buyer has to continue paying property taxes on the property after the closing date, they may be entitled to compensation for those taxes.
  • Insurance: If the buyer has to continue paying insurance on the property after the closing date, they may be entitled to compensation for those insurance premiums.
  • Temporary housing: If the buyer has to find temporary housing because the closing is delayed, they may be entitled to compensation for the cost of that housing.
  • Other costs: In some cases, other costs may be compensated for a delayed closing. For example, if the buyer has to pay for storage or moving expenses because the closing is delayed, they may be entitled to compensation for those costs.

Some Frequently Asked Questions on Various Online Platforms Like Google, Quora, Reddit and others

Is it acceptable and legit as seller to ask for compensation due to delayed closing of my house sale?

Answer is No. Seller usually owes no compensation for delay expenses, even if guilty. Seller may pay buyer’s losses if delay surpasses contract timeframe.Talk to seller and lawyer for best action in delay cases.

What happens if house doesn’t close by closing date?

Contract terms and delay cause determine seller’s compensation obligation. Breaching the contract by not closing on time can result in the non-breaching party seeking compensation for losses incurred. The contract may include provisions for reasonable delays or penalties for missing the closing date. In some cases, the seller may choose to cancel the sale, but this could have legal implications. Review contract, get legal advice for delay rights/options.

Also See- Can Power of Attorney Sell Property Before Death?


Review purchase agreements and contingencies. Communicate well to avoid delays. Get help from experts like agents and lawyers. Be proactive and informed. Achieve smooth and timely ownership transfer.

What is the firm closing date?

“Firm Closing Date” means Vendor’s agreed date to finish closing in Addendum.

What happens if a closing date on a house is delayed Ontario?

Builders are obligated to compensate purchasers up to $7,500+GST/HST ($150 a day) if the closing is delayed beyond the Firm Closing Date, excluding mutual agreement or Unavoidable Delays. Further information regarding the delayed closing warranty can be found in the attached Addendum of your purchase agreement.

Latest Articles

Buying a house that is zoned commercial

Introduction Investing in a house zoned commercial can prove to...

Can i sue my apartment complex in...

Can i sue my apartment complex? Reasons for Suing Your...

Understanding Condemned Property Tenant Rights: Protecting Your...

Living in a condemned property can be a challenging...