In multiple-offer situations, a closing guarantee may help buyers’ offers stand out. Written into a contract, these guarantees outline that if the transaction doesn’t close by a specified closing date, the affected party will be compensated.
Such a guarantee could offer home sellers greater assurance that a particular offer will close over others they received in a bidding war.
“A fast-closing guarantee, like saying you will close in less than 21 days, could be added as a contingency to possibly give a buyer a competitive edge, since it increases seller confidence in an offer,” Courtney Welsch, a broker associate with Baird & Warner in Chicago, told Apartment Therapy. “Like buyers, sellers have a vested interest in moving quickly to close the transaction.”
The lender typically decides what the guarantee amount will be, Apartment Therapy reports. For example, lenders could offer a buyer a guarantee of their own to leverage in the sale. Chase Bank is promoting on-time closing in three weeks, as long as all paperwork is received. The buyer will get $5,000 if the closing takes longer otherwise.
Closing guarantees are one tactic real estate professionals are turning to in multiple-offer situations. But they can be risky. Buyers will need to clearly understand what happens if the closing date comes without a completed transaction. The seller—or buyer—could receive money depending on the missed date with these contract contingencies.