You’ve done it. You have found your dream property, made an offer, had it accepted, filled out all the paperwork, and now it’s time to close.
Only there isn’t enough money. It might sound like a fluke or freak accident that could only happen to you, but it’s a case that occurs frequently!
But that doesn’t take away from how awful the situation feels. You find yourself anxious, stressed, and unsure where to turn or what to do.
You don’t want to lose out on your dream, but it seems to be slipping through your fingertips with every breath. And no matter where you turn, you can’t seem to find the answers that you need.
Well, no more! Today we are here to banish the anxiety once and for all! Keep reading to find out what happens if you don’t have enough money at closing. Whether you are a buyer or a seller, we have the answer for you!
What Happens If You Don’t Have Enough Money At Closing?
Let’s get straight into it! In most cases, the buyer and seller of the property are required to bring money to the table.
Whether that is to cover the solicitor’s fees or if the seller is taking on some of the buyer’s closing costs, both parties are required to pay. And when there isn’t enough money to do so, the deal can fall apart rapidly.
Lucky for you, we have some tips for what to do if the buyer or seller in your deal does not have enough money at closing. Keep reading to see what your options are and find one that could save your situation!
What Happens If The Buyer Doesn’t Have Enough Money At Closing?
In most cases, the buyer will have already paid part of their down payment as what’s known as earnest money. Usually, it is between 1 and 3% of the property’s value, but this does vary depending on the situation.
This money will go towards the downpayment of your home, which most buyers have already paid at the point of closing. If this isn’t the case, be sure to speak to your lender for some advice or seek financial advice if you feel that is best.
If, after paying the earnest money (your part downpayment), you notice there is more money to be paid, speak to your lender immediately. Go over the numbers and all paperwork to see if there have been any errors made.
In some cases, a simple incorrect calculation of a box not being ticked can land you in hot water. Go through all the documentation thoroughly and double-check any numbers to make sure this isn’t the case!
If you find that some fees or costs have been hidden from you or you were not informed about, there could be blame on the lender’s side. Speak to them if you can or their solicitors to see if there can be any adjustments made.
A simple negotiation can result in the seller agreeing to pay some of your closing costs for you. After all, they are keen to get the transaction closed and receive their money, so why not ask the question?
Failing that, if the numbers add up and there are no hidden fees, you will need to source the money from elsewhere or risk the sale falling through. Here loans can be helpful but remember there will be interest rates, and the money will need to be paid back!
Credit cards, personal loans, or even payday loans can generate income, but you must proceed with caution. Borrowing money and not repaying it on time can severely impact your credit score and leave you with mounting debt that is difficult to break free from.
Be sure to speak to a financial advisor or your lender for more advice here. They will be able to look at your finances and your situation and offer you solutions that can be helpful here.
What Happens If The Seller Doesn’t Have Enough Money At Closing?
Usually, the buyer is responsible for paying the closing costs, but it’s not always the case, and the seller pitches in. But, if you find yourself unable to do so after agreeing to shoulder some of the costs, what can you do?
Well, you could look at other sources to generate the money, such as loans or credit cards, but these leave you with money to pay back and often high-interest rates. If you can pay the money off in full and on time, though, they are options worth considering.
You can also look at shifting these costs back onto the buyer. You can discuss this with them or their solicitor to see if there is a negotiation to be had here.
Be mindful that when doing this, the buyer might ask for adjustments in return, such as a lower price or furniture left in the property.
Consider what you would be willing to offer them (if anything) in exchange before entering the negotiation. Ideally, these conversations should happen before you enter the closing period but can be discussed here if no other choice exists.
The final and least desirable option is to let the sale fall through. The buyer can also do this if they struggle to find the rest of the money for the closing costs.
It leaves you with legal fees still to pay, as you have come so far, but it is an option worth exploring if the seller or buyer finds it extremely difficult to locate the final funds.
And just like that, we have come to the end of our article today. As you can see, you can do a few things if you do not have enough money to close the sale of a property.
Although it comes with interest rates and risks, borrowing money from elsewhere is often used by both buyers and sellers to ensure that the deal completes and the sale progresses as it should.
You can also enter negotiations to adjust the price or for one party to take on some of the cost to ensure the sale goes through. Be sure to discuss all options with your lender and financial advisor to ensure that you select the method best suited to you.
To avoid this, be sure to have regular conversations and keep all parties well informed so that no one enters the completion phase without having enough funds.