OBSTACLES TO ON-TIME CLOSINGS
When you sign the contract to sell your home everyone assumes that the date on the contract is cast in stone. However, it is important to understand that there can be a number of issues that are beyond the control of the buyer or seller which could delay closing. Let’s look at a few:
- TILA-RESPA Integrated Disclosure: In 2015, regulation went into effect nationwide that required lenders to provide two forms laying out the details of a mortgage to borrowers, one at the beginning—the Loan Estimate—and one at the end of the loan approval process. It is the one at the end of the process, the Closing Disclosure, which can cause problems.
The Closing Disclosure must be given to the borrower at least three days before the real estate closing. This means that basically everything has to be finalized before the three-day period begins. If the Closing Disclosure is not received as required, closing will be delayed. Additionally, if changes to the Closing Disclosure are needed they must re-disclose, which means another three day waiting period and so on.
- Title Report Issues: Title issues are a common reason for closing delays. Liens on properties that sellers are unaware of must be cured prior to closing. This can happen when a seller pays off a lien (second mortgage) but the payoff is not filed in the deed records so an outstanding lien, that has been paid, may show on the title work.
- Appraised Value: In theory, the property appraisal should be completed long before the closing date, but in today’s market that does not always happen. Recent government regulations have made it difficult for appraisers to make a living so the pool of qualified appraisers is shrinking. This shortage translates into longer wait times from the order to the completion of the appraisal. When the appraisal is completed there is the potential for the property not to meet contract value which means renegotiation of the contract. Additionally, appraisers sometimes require that the seller make repairs prior to closing, which again, results in renegotiation of the contract.
- Survey Issues: Just because a home has sold several times does not mean that survey issues can’t crop up. A home of any age can run into boundary line encroachment disputes with regards to the land the home is situated on. Property lines, walls or fences can become an issue, and closing can be delayed until all parties can settle discrepancies through signed affidavits.
Many things need to happen for a real estate closing to take place on time. There are a number of legitimate reasons that a closing could be delayed and a few that are simply unavoidable. Rely on your Sales Associate and the Title Officer to manage the closing hurdles to avoid unexpected deals.
Terry Roberts, Owner/Broker