Imagine this – you’ve found your dream home after months of house hunting. The offer is accepted, inspections done, loan approved, everything looking good. Closing day arrives…and suddenly there’s a delay from the lender’s side. Days go by without an update, your moving plans are in chaos, and there’s still no word on when you can get the keys.
Frustrating right? But what recourse do you actually have in this situation? Can you take legal action if a lender drags their feet on closing on time? Let’s break it down.
What is Lender Liability?
First, we need to understand the concept of lender liability. This refers to the legal accountability and consequences lenders face for actions that harm borrowers or infringe on their rights. For example, failing to fulfill loan obligations or closing commitments on time.
Take the recent Bailey v. Branch Banking & Trust Co. case. Here, the borrower Bailey sued the lender for exerting excessive control over their business, leading to financial troubles. The court agreed the lender had been “grossly overreaching” in areas like denying employees basic supplies. Bailey was awarded $5.4 million in damages!
So lenders absolutely can face lawsuits for negligence or contract breaches affecting borrowers. But closing delays specifically are less clear cut…
Why Do Closing Delays Happen Anyway?
Before we decide whether to lawyer up, it helps to understand why closings get held up in the first place. There are actually many reasons, some fully outside the lender’s control:
- Title report issues – The most common culprit. Liens, judgments or other claims found against the property during title checks.
- Mortgage issues – Delayed loan approval if the buyer’s credit, income etc. needs review.
- Appraisal problems – Lower than expected property valuation can stall buyer financing.
- Survey problems – Surveys uncovering property disputes needing resolution before closing.
- Unrealistic contract dates – Dates too ambitious for the actual closing process timeframe.
- Walk-through issues – Problems found during the final walk-through inspection.
- Financing setbacks – Lenders requesting more buyer documentation to approve loans.
- Errors in paperwork – Incorrect names, figures needing reworking before closing.
See how there are multiple moving pieces to a real estate deal closure? It’s no wonder hiccups happen. But if the lender drops the ball…
What To Do If My Lender Doesn’t Close On Time
Ok, it’s three days past closing and you still don’t have the keys. The lender isn’t giving clear updates. Now what?
📝 Communicate in writing – Email detailing the closing delay and expected resolution. Paper trail!
📞 File formal complaints – Escalate to regulatory agencies if no or vague lender response.
🏡 Be prepared – Closings are complex; have buffer time and submit docs early.
💼 Get title insurance – Added protection if disputes emerge over property ownership.
🤝 Attempt to negotiate – Discuss new dates if lender truly can’t close on time.
⚖️ Consult an attorney – Key to know if delays warrant legal action for damages.
I know it’s frustrating, but staying pragmatic can pay off. Let’s see when suing actually makes sense…
Suing My Lender for Failing To Close
The magic words here are breach of contract. As we saw earlier, lenders are now vulnerable to lawsuits for not upholding lending commitments.
But – and this is key – borrowers must prove:
- The lender’s actions directly caused financial loss.
- And they displayed negligence or bad faith.
If you can show egregious foot-dragging past agreed closing dates, plus losses from moving delays, you may have a case. The suit could seek:
- Compensatory damages – Recovering clear monetary losses.
- Payment of related expenses – Added costs from delays.
- Even punitive damages in some cases!
But don’t expect an easy home run…
Potential Outcomes of Legal Action
Look, lender liability lawsuits are still rare. Pursuing damages requires concrete proof of contract breach, negligence and resulting harm.
If you win, possible outcomes include:
- Compensatory damages to cover financial losses.
- Reimbursing expenses racked up from delays.
- Potentially punitive damages too.
However, it’s challenging to definitively prove lender misconduct. Negligence is also difficult to establish if closings are delayed for logistical reasons.
Preparing documentation and arguing your case requires specialized legal expertise. Which brings us to…
Alternatives To Lawsuits
Before pulling the lawsuit trigger, consider alternatives that could resolve issues without court battles:
Mediation – An impartial, trained pro facilitates compromise between you and lender.
Arbitration – Like mediation but arbitrator makes final, legally binding decision.
Negotiation – You work directly with lender to reach mutual agreement.
Refinancing – Explore another lender if delays stem from yours.
Loan modification – Adjust loan terms with current lender to aid affordability.
These options may offer faster, less adversarial conflict resolution. But consider them carefully vs legal action for your situation.
When To Consult An Attorney
Navigating lender disputes seems complicated right? It is!
Mortgage contracts contain complex legal language around events like closing delays. Add subjective aspects of “bad faith” and “negligence” and most laymen are lost!
Yet your options, rights and recourse hinge on understanding these details.
My advice? Don’t delay (pun intended)! Connect with a specialized real estate attorney for personalized guidance the moment lender delays threaten your home purchase.
Yes, it’s an added expense. But expert advice now can save you massive headaches, heartaches and potential damages down the road. And arm you to demand accountability if lenders are indeed dropping balls.
In Closing…(see what I did there?)
Few situations are more stressful than having your dream home purchase jeopardized by lender foot-dragging. Gather documentation, stay pragmatic in expectations, but don’t hesitate asserting your rights if negligence threatens the deal.
Specialized legal advice is key; laws around “lender liability” and what constitutes actionable delays are complex. With an expert guide helping analyze whether delays warrant lawsuits or alternative resolution approaches, you can make informed choices.
And maybe finally get those house keys! Good luck.