Why are late closings happening so often in today’s real estate market? There are several factors contributing to the high percentage of late closings in home sales.
The volume of short sales and bank-owned property being sold.
Short sales notoriously close late because, although approved by the bank already, the settlement figures drafted by title companies must be approved by the seller's mortgage company within the 48-72 hours immediately prior to closing. The volume of files needing approval is sometimes so great, especially at the end of the month, mortgage companies simply cannot get them all approved ontime.
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Recent legislation requires truth-in-lending be disclosed to a buyer three days prior to closing.
Legislation was passed last year requiring the truth-in-housing disclosure be presented to a buyer at least three days prior to closing. This means last minute changes often reset the three-days-before-closing clock.
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The rigid requirements from lenders prior to releasing mortgage funds for closing.
The standards of lending are still very strict; many closing are delayed because cautious underwriters are requiring additional documentation before approving the loan. Documentation of financial items may be a hassle to produce, but the quicker you provide everything the underwriters ask for, the better your chances for an on time closing.
Title issues, especially prevalent on the bank-owned foreclosure homes.
Banks are struggling with many title issues, some caused by the famous ‘robo-signing’ incident. There is nothing more important than obtaining a clear title to your new property. Incidentally, I strongly suggest that you work with your own title company when purchasing a bank owned home. Your realtor will likely have a title company to recommend. Go ahead and price shop if you wish, but don’t undervalue the protection of having a title company separate from the one the bank is using.
How does this affect the home buyers and home sellers in the south of the river suburbs? What are the consequences of a late closing?
Delayed home closings can be costly for both buyers and sellers.
Costs incurred by a seller include additional days of interest on their mortgage, additional homeowner’s association fees, temporary lodging if the house is packed up, costs to reconnect utilities, loss of deposits on truck rentals, and additional days off from work. If sellers can were planning to use the proceeds from their home as a downpayment on another home, they may lose the earnest money previously deposited towards that purchase.
Costs incurred by a buyer include arranging for time off work, giving notice at their current rental, hiring a moving company for that date or gained the commitment of family and friends to assist in the move, changed all utilities into their name, scheduled service calls such as cable and phone installation or new furniture delivery. Buyers often incur substantial costs when making alternate arrangements for all these situations.
Take proactive steps to prevent a delayed closing.
Buyers can certainly improve their odds of closing on-time by carefully selecting a mortgage company which provides the funds at closing instead of arranging for a 3rd party/investor to fund the loan and by responding quickly to all requests from their lender for documentation.
Sellers can minimize the chance of a late closing by negotiating clauses into the purchase agreement including a ‘24-hour-after-closing’ possession time and a ‘buyers loan must be approved by underwriting’ on a certain date. These clauses are extremely beneficial since they allow all parties to be notified very early about issues which could delay the closing.
If everyone knows well in advance that a closing will be delayed, steps can be taken to minimize the costs and inconveniences for both buyers and sellers.
When you need a real estate agent to sell your Burnsville, Apple Valley, Eagan or Lakeville Minnesota home, give me a call at 612-889-6496. I’m also very happy to answer your real estate questions about home closings, financing, preparing to sell or any other topic! Just Ask Me a Question!
