Posted on Thursday, September 15th, 2022

happy couple is taking keys from their new house from broker and smilingBuying a new home is an exciting experience, but it can also be complex. Real estate contracts are often filled with confusing jargon. Some details, like automatic extensions, can be difficult to understand. If you are preparing to buy a new home, Nishad Khan P.L. can provide you with support and guidance throughout every step of the home-buying process.

What Is an Automatic Extension?

An automatic extension is an extension term within a sale and purchase contract that allows the buyer to extend the closing date upon the happening of a certain event. An example of an automatic extension would be if closing funds from the mortgage lender are not available on the date of closing due to Consumer Financial Protection Bureau (“CFPB”) Closing Disclosure delivery requirements. In this circumstance, if the lender’s Closing Disclosure delivery requirements are not timely complied with, the date of closing would automatically extend for up to 10 days to permit the lender the time it needs to comply with its Closing Disclosure delivery requirements.

How Does It Work and When Does It Apply?

In October 2015, the CFPB instituted a new rule requiring lenders to deliver a Closing Disclosure to its borrower(s) at least three business days prior to the date of closing. In response, the Florida Association of Realtors and Florida Bar Joint Committee revised the FR/Bar Contracts, generally used in purchase and sale transactions, to make it easier for lenders to comply with these updated requirements.

If CFPB disclosure delivery requirements prevent a lender from providing a buyer with funds on the date of closing, the date will be automatically extended for up to 10 days. This ensures that borrowers will not lose their deposit if a mortgage lender fails to deliver the Closing Disclosure to them in time. It is important to note that the closing date will not automatically be extended if delivery of funds are delayed for other reasons.

Does an Automatic Extension Help in Real Estate Transactions?

An automatic extension can benefit borrowers, but it is important to understand that it only applies under certain circumstances. The delay in funding must be related to CFPB Closing Disclosure delivery requirements to be entitled to an automatic attention. While the closing date can be extended for up to 10 days, the closing date will only be extended long enough for the lender to meet its CFPB requirements.

For example, if the Closing Disclosure is not given to the borrower at least three business days before the Closing Date, the lender has not met its CFPB delivery requirements. In this case, the automatic extension would kick in; however, the new closing date would need to take place three days after the delivery of the disclosure documents.

While an automatic extension can help protect a borrower’s deposit, it will not apply in all cases. If you expect a lender delay but are not certain that the delay will be related to CFPB delivery requirements, it is best to take other measures to prevent a contract default. For example, you could enter into an executed extension to real estate contract and treat the automatic extension as a backup plan.

How an Orlando FL Real Estate Lawyer Can Help

Many buyers make inaccurate assumptions about automatic extensions and how they work. When you work with a real estate lawyer Florida, you will be able to ask questions about your real estate contract and get the information you need. An attorney can keep you from making a costly mistake.

Many disputes can arise during the closing process, but an attorney can help you resolve these issues smoothly. If the closing is delayed, your attorney can take steps to prevent you from losing out on your deposit. A lot can go wrong when you buy a home, which is why you should have the protection of an experienced lawyer.

Buying a home is one of the largest and most significant purchases ever. Do not risk going through this process alone. Nishad Khan P.L. can answer your questions about automatic extensions, title searches, and other matters. Call us at (407) 228-9711 to learn more.