In a real estate transaction, escrow closing dates are carefully agreed upon by both the buyer and seller. However, there are times when the closing needs to be extended—often due to buyer-side delays such as loan approval, appraisal, or document processing issues.

When this happens, one important concept comes into play:

💰 Per Diem Charges
📌 What Is Per Diem?

“Per diem” simply means “per day.”

In real estate, it refers to a daily fee charged when escrow does not close on the originally agreed-upon date.

This fee is typically used to compensate the seller for additional carrying costs, which may include:

🏦 Mortgage interest
🏠 Property taxes
🏢 HOA fees
🛡 Insurance
⏳ General inconvenience of holding the property longer
⏱ When Does Per Diem Apply?

Per diem charges are usually applied when:

📄 The buyer requests an extension of escrow
💳 The delay is caused by buyer-side financing or contingency issues
🤝 Both parties agree to extend the closing date with compensation terms

⚠️ Important: Per diem is not automatic.
It must be agreed upon in writing, usually through an escrow extension addendum.

👤 Who Pays the Per Diem?

In most cases:

➡️ If the delay is caused by the buyer,
💰 the buyer is responsible for paying the per diem fee to the seller.

This helps compensate the seller for holding the property beyond the original closing date.

🧮 How Is It Calculated?

Per diem is typically based on the seller’s daily holding cost:

📊 Formula:
Monthly mortgage + taxes + insurance ÷ 30 days = daily per diem amount

Then:

📆 Daily per diem × number of extension days = total per diem

⚖️ Why It Matters in Negotiations

Per diem can become an important negotiation point during escrow extensions.

It helps both parties:

🤝 Avoid misunderstandings
⚖️ Keep negotiations fair
📅 Maintain a smooth closing process
🧠 Final Thoughts

Escrow extensions are sometimes unavoidable, but they should always be handled with clear communication and written agreement.

Per diem simply ensures fairness when one party needs extra time to complete the transaction.

🏡 With proper guidance from an experienced agent, the process can stay smooth, clear, and on track until closing.