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Whether you’re currently buying or selling a home or you’re planning on buying or selling a home in the future, it’s important that you understand that there can be delays in a real estate closing. A real estate contract and the terms and conditions that are set forth in a contract do carry significant importance, however, they are not always concrete.
A very common real estate myth that both buyers and sellers often believe is that the closing date in a real estate purchase contract is actually when the closing will occur. Since both a buyer and a seller agree to a target closing date in the purchase contract it is great when a closing actually happens on or before that date, but it isn’t always possible.
There are many reasons why a real estate closing can be delayed or even worse, cancelled. Since there are so many parties involved in a successful real estate transaction, it should be understandable that delays can happen, but why?
Below you will find the top 10 reasons why a real estate closing is delayed and some pointers to help increase the chance that a delay does not occur in your real estate closing!
Unrealistic Contract Dates
Whether you’re a buyer or seller, it’s imperative that you have a top real estate agent representing your interests. One of the most common reasons why a real estate closing is delayed is because of unrealistic contract dates that were agreed upon in the purchase offer.
Generally speaking, it will take roughly 45-60 days for a real estate closing to occur after a purchase offer is accepted. This of course depends on the type of financing a buyer is using to purchase the home, the number of contingencies in the purchase offer, and many other variables. It is completely unrealistic for a real estate closing to occur in 21 days for a buyer who is obtaining an FHA mortgage.
A top real estate professional should know whether the contract dates are realistic or not. For example, if you have a top producing listing agent and you receive a purchase offer with unrealistic contract dates, they will know what questions to ask the buyer’s agent and also what to advise you to counter in the purchase offer.
Bottom line, a common reason why real estate closings are delayed is because of unrealistic contract dates. Don’t make the common mistake made when selecting a real estate agent and decide to work with your friends sister who is a real estate agent or a colleagues spouse, make sure you have a top agent working for you so that the chances that the closing will be delayed is less!
Real Estate Appraisal Issues
When buying or selling real estate you need to understand that a large piece to a successful home sale is the bank appraisal. A bank appraisal is part of a real estate transaction anytime a buyer is obtaining a mortgage. It’s also critical that you understand that there are common problems with bank appraisals.
Problems with a bank appraisal are a very common reason why a real estate closing can be delayed. The reasons issues that arise from a bank appraisal can delay a closing can vary from a home that under appraises and the buyer and seller cannot come to new terms or because of repairs that are required by the appraiser.
Whether you’re buying or selling a home, it’s important that your real estate agent is following up to make sure the appraisal has been completed, to make sure the home appraised at the sale price or greater, and finally that there were not required repairs resulting from the bank appraisal. Nothing is more frustrating than a seller who finds out a week before a target closing date that there were indeed repairs required in the banks appraisal that need to be completed prior to closing.
Title Related Issues
Real Estate Title Issues Can Delay A Closing
Another popular reason why a real estate closing can be delayed relates to the title of the piece of real estate. One of the most important reasons why it’s suggested both a buyer and seller hire an attorney is because they will help ensure “clean title” is being transferred.
It can be extremely frustrating for a buyer who is attempting to sell a home in the future only to find out there were previous liens against their home that were not discovered when they purchased the home. A home without clean title is virtually unsalable.
There are certain title related problems which actually arise frequently. Most of the common title related problems can be solved, but take significant time and will likely delay the closing or possibly cancelled.
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 buyer’s 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.
Instrument Survey Related Issues
Another task that a real estate attorney will perform is a review of an instrument survey. An instrument survey in real estate can be defined simply as a drawing of the land a home is situated on. Real estate closings can be delayed in the event there is a discrepancy in the instrument survey.
One of the most common discrepancies in instrument surveys in real estate are boundary line encroachments or disputes. An example of a boundary line encroachment could include a neighbors fencing being on the property of the home that is being sold or vise versa.
Instrument survey issues often are solved by the included parties signing an affidavit which indicate the consent and understanding of the dispute or encroachments. The reason these disputes or encroachments can delay a real estate closing is because it maybe possible the parties who need to sign an affidavit are unable to be reached or are unwilling to sign off on the affidavit.
Disparities In Closing Figures
Prior to a closing in real estate, both the buyer and seller are given their respective closing figures. The closing statement, which for years was referred to as a “HUD-1 Settlement Statement,” was not always accurate or one party (or both) believe it was not accurate.
There are currently changes that are being made in the documents that are prepared for closing and the figures that go along with a real estate closing. As of October 2015 the HUD-1, as well as the Good Faith Estimate, will no longer be used for closings. They are being replaced by the closing disclosure and loan estimate.
No matter which forms or documents are being used for real estate closings, it’s important to understand that one of the most popular reasons why real estate closings are delayed is because of disparities in the closing figures.
Lender Requires Additional Documents
When a buyer receives their mortgage commitment, it means the funds have been approved and the closing can occur, right? In most cases it does mean the funds have been approved, however, there are times when a lender will require additional documents at the last minute.
Even if a buyer is pre-approved, then receives their mortgage commitment, and is cleared to close, lenders are going to at the very least review their credit and bank statements one final time within a few days of closing.
Reviewing the credit and bank statements are not the reason real estate closings are delayed but the additional documents a lender may require after reviewing them is a reason that closings are delayed.
For example, during a recent sale in Webster, NY the buyer had some large deposits appear in their bank accounts a few weeks before closing. The lender required a letter of explanation from the home buyer that explained where the deposits and money came from which ultimately delayed the closing a few days as the file had to go back to the underwriter at the bank for them to review and clear to close again.
Agreed Upon Repairs Are Not Completed
Incomplete Home Repairs Often Delay A Real Estate Closing
There are tons of reasons why home buyers have home inspections. The primary reason why home buyers have a home inspection is to ensure the home they are purchasing doesn’t have any major deficiencies that can cost tons of money in the future.
After a home inspection is completed, the buyer has the opportunity to request repairs be completed or some type of seller concession, in lieu of the repairs. If a seller agrees to make repairs, it’s important that these repairs are done once a buyer receives their mortgage commitment.
Real estate closings are frequently delayed because a seller “forgets” to make agreed upon repairs or simply neglects to do them. If you’re buying a home you should expect from your real estate agent that they are ensuring the repairs that you’ve negotiated to be completed are getting completed well before the closing is scheduled so there are no delays in closing.
Final Walk Through Problems
The final walk through is an important step in the real estate transaction, especially for a buyer. A final walk through is the last opportunity for a buyer to walk through the home they will soon own.
There are many things that a buyer should be on the lookout for at the final walk through. One of the biggest reasons to do a final walk through is to ensure the house is in “broom-clean condition.” Additional reasons to do a final walk through include;
Ensure agreed upon repairs are included
Furnace is functioning
Air Condition is functioning
Included appliances are functioning
Utilities are functioning (water, electric, gas)
Toilets are functioning
So what happens when the utilities aren’t functioning at the final walk through? You guessed it, the real estate closing is delayed! Since the final walk through typically happens the day prior to the closing or sometimes even on the closing day, it can be extremely frustrating for a buyer to find out they will not be closing because of a problem resulting from the walk through!
Professional(s) Involved In Transaction “Drag Their Feet”
Since there are many professionals who are involved in a real estate transaction, it’s imperative they are on their game! Whether it’s an attorney, a lender, a real estate agent, appraiser, or other professional, another common reason why a real estate closing is delayed is because one of the professionals who is involved in the transaction “drags their feet.”
For example, if a closing is delayed because an attorney didn’t order the survey until the week of closing, do you think the buyer, seller, and real estate agents are going to be happy? The answer is obviously no. This is only one example of how professionals in a real estate transaction “drag their feet,” some other examples include;
Real estate agents don’t get lender required documents signed and returned to lender
Bank appraiser delays re-inspection of bank required repairs
Mortgage consultant does not turn in all documents to processor/underwriter
The Buyers Mortgage Is Rejected
When a buyer’s mortgage is rejected, it will create a significant delay in a real estate closing. It could be as short as a 60 day delay while a new buyer is found or as long as several years if a new buyer cannot be secured. There are tons of reasons why a mortgage is denied after a pre-approval is issued, but none make the delay in closing any easier for a seller.
There are lots of things that need to happen in order for a successful real estate closing to take place, on time. Again, it’s important to understand that all real estate closings do not happen on or before the target date in the contract. Sometimes a real estate closing is delayed for a legitimate reason that could not have been avoided and other times it is delayed because of a problem that could have been avoided.
It can be very frustrating when a real estate closing is delayed, however, being aware of the above reasons a closing is delayed can help reduce the shock, should it happen to you. Also, it can help you by knowing what your real estate agent and other professionals involved in the transaction should be doing.