11 Tips to Prevent Real Estate Closing Delays
If you’re thinking of buying a home, selling a home or perhaps already in the process, one of the most painful things a first time buyer, or any home buyer, can face is a delayed real estate closing which can cause a great deal of upset.
Bookmark this page! If you are selling a home, these tips will serve you well as they would a home buyer.
Just because you have a closing date, or just going with what generally accepted time frames are is no guarantee that your real estate closing will happen in a timely manner.
There are many reasons a real estate closing can be delayed, some of it falling on the seller’s shoulders, some on the agents involved and some delays are caused by the home buyer.
If your time frame to purchase and close is critical, perhaps under a current lease and trying to buy a home, or purchasing due to relocation and career requirements, it’s important to understand what can go awry, and what steps you can personally take to ensure a timely real estate closing.
Real Estate Closing Delays
1. The Agents and Professionals Involved – I hate to say it, but not all real estate agents are equal and on either side of the transaction, an agent that is not responsive and on-the-ball with documents, scheduling and timely responses can delay your closing. Make sure the buyer’s agent you work with has a great reputation and lots of great reviews with plenty of transactions under their belt.
In addition to real estate agents, other industry professionals can negatively affect the expected time frame to close. A mortgage lender may be slow to order an appraisal, the appraiser may be slow to schedule, a needed survey of the property and boundaries may not be timely. Mortgage lenders will sometimes also call for additional documents, even after an offer was accepted and a closing date is issued. Be well-prepared for anything a lender may ask for.
A great deal of what affects the closing date are services ordered by the mortgage lender. Great real estate agents are quite careful about which mortgage lenders they choose to work with. Partly for what home loan products they offer, as not all homes and buyers qualify for certain types of loans, but also partly because of trusted track records and performance.
2. Keeping the Real Estate Closing Date Realistic - For most offers that are financed, home buyers could reasonably expect a closing in 45 to 60 days. There are, however, many things that can add significant time in addition to the usual time frame as highlighted in this post.
A great real estate agent is able to advise you on a closing date expectation upon reviewing the situation and consider what factors might cause delays.
3. Contingencies Can Cause Real Estate Closing Delays - One factor is the number and type of contingencies. It could be you have to sell your current home first to close on the new property; that at least is something known upfront. Another contingency that also causes closing delays are repairs or updating to the home. Competent, experienced agents are able to advise on this as well. The fewer contingencies, the less likely a closing delay will occur.
4. Distressed Properties Often Associated with Closing Delays - Many home buyers dream of buying a distressed property, perhaps a foreclosure, and doing the repairs themselves. This is impossible if the buyer is financing as Federal law prohibits this. One solution is an FHA 203k or 203b renovation loan, with funds for the repairs structured into the loan with some choice of materials, paint color etc.
This, however, opens a lot of possibilities for real estate closing delays. With an FHA renovation loan, if the appraisal requires repairs they are to be done prior to closing, which can cause significant closing delays and called a "condition" on the appraisal. Peeling paint, flaking lead paint is a prime example of this. On the other hand, if with an FHA renovation loan, the appraisal has no conditions the work can be completed after closing but typically must be completed within 60 days.
5. Closing Delays over Appraisal Issues - As you can see from tip number 4, appraisal can adversely affect a real estate closing. Any time a home is being financed there is an appraisal involved and one of the most common reasons for delayed real estate closings.
If the home doesn't appraise for the offer price a few things can happen; if your agent is a good one, using CMA's or comps and local data a great agent can present and successfully argue the case with the appraiser. This is a great subject and question to ask when you're interviewing a buyer's agent by the way.
Secondly, work can be done to bring the appraisal and offer inline, but this too is often a significant delay and one reason today's home buyers want move-in-condition homes.
6. Home Inspections and Home Repairs - It is unwise under any circumstances for buyers to not have home inspections done. Should the home inspections be unsatisfactory repairs can be requested, but depending on scope and scale of the repairs, the real estate closing could be on time, delayed or significantly delayed. After the home repairs have been completed, they still may not have been completed satisfactory or incomplete upon next inspection.
7. Title Issues Can Delay Closings - Title is another topic that can cause significant real estate closing delays. When a home is being purchased, the title company will conduct an abstract of title to uncover issues such as property tax or mechanic's liens ( a lien filed against the property for work performed but not paid for) and other items.
Home sellers will do well to handle anything that can cause a title issue. Pay the property taxes, remedy any liens filed etc.
The title company makes sure that the title to the home is "free and clear of defects", however it's not always a 100% sure thing, and that's what title insurance is for. If liens or other encumbrances are discovered, the seller or current property owner must have these issues dealt with before title can be successfully transferred, causing a delay in closing.
If you are selling a home, a preliminary title search is a great way to preempt potential issues that you may not be currently aware of. Should the transaction fall apart for any of the other reasons listed here, at least the title portion of selling the home is already completed and won't be responsible for another real estate closing delay.
If you’re selling your home, one way to help reduce the risk that your real estate closing is not delayed is to advise your attorney to perform the title search once you’ve received a purchase offer. Many sellers attorneys will wait until a buyer receives their mortgage commitment, however, waiting for the buyers mortgage commitment can cause delays in the future. A title search is going to be performed in almost every situation, so even if a buyer gets declined for their mortgage, at least the title search is already completed and will not hold up a future transaction.
8, The Home Buyer Can Botch Their Pre-Approval - Many first time home buyers jump for joy upon getting pre-approved and then getting an offer accepted on a home. In their exuberance they may open a credit account at Home Depot and get 10% of their first riding mower or celebrate by purchasing a new car for that spanky new garage.
Even a 5-10 point dip in credit score, or just one percentage point difference in the debt-to-income ratio can cause a buyer to lose their pre-approval and home loan. Even quick work on the behalf of the lender and coaching the buyer to rectify the credit issue can't stop a real estate closing delay from occurring. Sometimes, the agent and buyer will seek out another lender that may be able to pre-approve the buyer again, however, the likelihood of a closing delay to flat out failure is great.
9. Property Surveys Can Delay Real Estate Closings - When riparian, or water rights, easements that aren't clearly defined, encroachments like a neighbor's fence or property boundaries are in question, a survey is often called for. If there are any discrepancies, other parties with connecting properties will have to sign an affidavit or possibly even refuse to sign one.
If you're selling a home, it's a great idea to have a survey done before listing just like having a preliminary title done. Noting that these have both been done and any issues dealt with can actually be used as attractive selling points.
10. Final Walk-Through Surprises - Just as with never declining to do a home inspection, home buyers should always conduct a final walk-through checking appliances, fixtures, household mechanics and also for anything else like vandalism, theft, weather damage etc. Final walk-through should be conducted the day before or preferably the morning of the closing day, as once you're handed the keys, it's your home (or headache) now.
11. Closing Cost Issues at Closing - Sometimes at the closing table, disparities with closing disclosure and loan estimates present causing review and revision and typically a new closing date. In some cases this can cause the failure of the transaction. Again, this is why you really need to review the buyer's agent you choose to work with. Check testimonials and reviews as good real estate agents are extremely discerning about what mortgage lenders they will or won't work with. It takes a village of professionals for buying or selling real estate, good agents choose top-notch lenders.
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