The most general meaning of the word Default in regard to a real estate transaction can be described as the failure to promptly pay principal or interest amounts when it becomes due. Once the borrower has failed to make the scheduled payments for at least 90 days, the loan becomes a nonperforming loan and is considered to be in Default. When this occurs, the lender will issue a notice of Default to the borrower which becomes a public record. The lender will then have the option to either work with the borrower to create an alternative payment schedule or they may choose to foreclose on the property resulting in forfeiture. There are other ways to Default in a real estate transaction. Both the buyer and the seller make certain promises to do specific things within a predetermined and reasonable time frame. A buyer’s failed guarantee could be anything from not placing a good faith deposit in escrow on time, not completing loan paperwork or submitting a signed disclosure on time, as well as not bringing the necessary funds to closing. A seller too can Default by not moving out on time or having finished required projects before inspection and a final walk thru. If one or the other does not perform as agreed upon, they could possibly be in Default. These Defaults don’t always result in a sale not closing but they will cause a delay, potentially harming the other party involved.

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