You’ve signed your real estate contract that included a specific date for closing. You’ll meet all the parties at the closing table on that date, right? Wrong…maybe. The closing date agreed upon in the real estate contract is tentative until the mortgage company and title company/attorney confirm it. There are times when that date may come and go without an end in sight. Why is that? Below we’ll examine the most common reasons closing is delayed.
- The mortgage company hasn’t completed their underwriting. After the mortgage crash in 2008, lenders became much more strict in their underwriting guidelines. Buyers are now required to provide solid proof of employment, cash flow, debt information, and savings. Once the mortgage underwriters receive all of this information they need to complete their own verification process which can take time and if changes in the Buyer’s credit report or bank statements take place it may cause the underwriting process to start all over. The mortgage company will also require an appraisal and most likely a home inspection report. If the appraisal comes back lower that the agreed upon price the mortgage company will require a lower sales price or not the loan. If the home inspection report lists repairs are needed the mortgage company may not agree to lend the money until the repairs are made and reinspected.
- There are issues with the chain of title. Running concurrently with the mortgage underwriting process, the title company is underwriting the title to the house. They are responsible for issuing a clear title to the Buyer, which means they need to account for the mortgage(s) being paid off at closing, ensure taxes are current (or will be paid at closing), and the owners listed on title are the same owners attempting to sell the property. Issues arise when a prior mortgage still shows of record, the chain of owners is incomplete or incorrect, the legal description to the property is incorrect, or any other questionable information that is discovered in their research of the public records. Because the contract states that the Seller will provide a clear title to the Buyers at closing, closing cannot take place until all issues are resolved and depending on the issue will dictate how substantial the delay may be.
- Communication between all parties is lacking. All of the parties (or their representatives) need to communicate throughout the process. The mortgage company may have a last minute requirements they need the Buyer or title company to fulfill or the title company may not have availability for the closing date or time originally requested. Simple issues can turn into big headaches if communication breaks down.
- The Buyer or Seller runs into money troubles. It takes a lot of cash to buy a home and even if the Buyer is mortgaging the property he or she will still need to bring money to the closing table. Many Buyers rely on the funds from the previous home to fund their new home. If the previous home doesn’t close by the time their home is they will most likely won’t have the funds readily available to close. On the flip side, if the Seller was expecting to simply break even on the property they may need to scramble to find available funds to cover any unexpected costs.
- The final walk-through uncovers new problems. Sometime within 24 hours of closing, the Buyer and Seller (along with their agents) will complete the walk-through and sometimes it can unveil issues that were either hiding during the showings and inspection (holes in the walls, stains/rips in the carpet or gouges in the flooring) or the Sellers did a less than stellar job when they moved out leaving behind garbage or a house that’s in less than “broom swept” condition. If the Realtors and their clients cannot come to a quick resolution to the issues it can result in a postponed closing.
So what should you do if you’re closing is subject to a delay? First, stay calm. What’s done is done, there’s no point focusing on what should have been done only what can be done now. Try to respond to any requests from the lender or title company immediately and keep in touch with your Realtor and/or attorney throughout the entire process. If a situation arises that requires additional negotiation for a repair or credit at closing attempt to find some middle ground with the other party that will resolve the issue quickly and keep the ball rolling towards the goal of a closed and completed transaction.