What Is a Closing Guarantee?

Finally! After searching and searching, you’ve found your dream home. (And in this volatile market, too!) It’s a great feeling, but not necessarily one that sticks around. Once you put in your offer, you might hear back from your Realtor that yours isn’t the only one on the table. In order to keep your offer top of mind — and give it the best chances of succeeding — try this one secret weapon: a closing guarantee.

A closing guarantee is something written into the contract that says if you don’t meet the specified closing date, the buyer or seller will be compensated.

“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,” says Courtney Welsch, a broker associate with Baird & Warner in Chicago. “Like buyers, sellers have a vested interest in moving quickly to close the transaction.”

The typical guarantee amount varies based on the lender’s regulations and what the buyer and seller agree to. (The lender is the one typically deciding what the guarantee amount will be.) Chase Bank, for example, is currently promoting an on-time closing in three weeks, as long as all required documents are received — and if the closing takes longer, the buyer will get $5,000. The amount could be lower or higher than that (some other lenders are offering $1,000 for a closing in less than 25 days), but it always provides some compensation if things go off the rails.

Simply put, if you have a closing guarantee, it makes the offer seem more serious. Wouldn’t you feel more comfortable with a buyer who’s offering you money if things don’t go as planned?

“At a time when lenders are missing dates because of the heavy closing traffic in this market, these lenders are essentially saying ‘we can get you over the finish line,’” Welsch says. “It helps to bring calm to the experience for a buyer in a market that’s prone to stress. If you can say you will close 21 days from application, that could put you ahead of the game in getting an offer accepted.”

As always, it’s good business to read the fine print on the contract you’re signing. Make sure your Realtor or real estate lawyer walks you through the language surrounding the closing guarantee in the contract, whether you’re the buyer or the seller. Be sure you know exactly what will happen if the closing date comes and goes without a finished sale. And remember that this can go both ways, with either the buyer or the seller receiving money depending on who missed the date. Be sure that’s worked into the contract as well.

“Sellers are looking for the quick close and timing is everything,” Welsch says. “Timing brings value to any transaction so a closing guarantee is a way that lenders can put their money where their mouth is.”