Buying a home, plan for closing delays

Reblogger Elva Branson-Lee
Real Estate Agent with Solid Source Realty GA 320764

This is information of interest for those purchasing or selling a home during this time of instituting new closing processes and paperwork. Most often, real estate closings close as scheduled, but sometimes things to do happen to slow closings down. It's always wise to prepare for the unexpected delay, and never more so than now, while the industry adjusts to new closing forms.

Troy Erickson has written this helpful article to arm buyers and sellers with right expectations. 

Original content by Troy Erickson License # SA577557000

National Association of RealtorsWhen in the market to buy a home, buyers should be aware that issues may arise, and plan for closing delays. A recent daily news article through Realtor.org reported that 32 percent of all real estate transactions encounter some type of delay in their closing. This survey of more than 2,600 real estate professionals was conducted last month by the National Association of REALTORS®. The survey asked real estate professionals about their sales and purchases from the previous three months (October through December of 2015).

 

New TILA/RESPA Integrated Disclosure (TRID) rules were made effective October 3, 2015. This is an entirely new process for lenders and borrowers to secure loans, and includes new forms called the Closing Disclosure and Loan Estimate, that replace the HUD-1 and Good Faith Estimate (GFE). These new rules and forms are supposed to make it easier for borrowers to compare quotes from different lenders, and to streamline the process.

 

However, a recent survey by Ellie Mae shows that it took an average of 49 days for a mortgage loan to close in December of 2015, compared to 42 days to close a loan in December of 2014, prior to the changes. This certainly could be another reason for a delay in closing loans, as the new TRID rules started impacting closings in November of 2015, but it was not one of the top three in the NAR survey.   

 

There were three main causes for the delays in closings:

1. The survey reported that out of the agents who experienced delays, 46 percent of those delays were caused by buyer financing issues.

2. Appraisal issues, where the appraisal differed from the agreed-upon sales price, accounted for 21 percent of the delays.

3. Home inspection issues were the third cause for closing delays, and made up 14 percent of the delays in closing a transaction.

 

The good news is that only about 6 percent of all transactions in the survey fell apart, meaning 94 percent eventually closed. Financing, and home inspection issues were the primary reasons the deals did not close, so most of the appraisal issues were resolved.

 

The main financing delays were cause by changes in the borrowers credit score from the time the loan was approved, to the time the loan was scheduled to close. Lenders run a final credit report just before closing in order to verify that there have been no changes in the borrowers credit score from the time their loan was approved. Often times, borrowers that are in the process of buying a home will purchase new furniture, appliances, or even a new car at the same time. This can seriously impact their credit score, and result in them no longer qualifying for the loan.

 

"It is advisable for anyone in the process of buying a home not to take on any additional credit    until the loan has funded, and the home purchase is complete. Do not apply for more credit cards, and do not make additional purchases on credit, or that require financing." 

 

Another financing issue that tends to delay closings is when a borrower fails to disclose all ongoing payment obligations, such as child support. This can affect the debt-to-income ratio, and also lead to the borrower no longer qualifying for financing. 

 

"It is advisable for any borrower to be honest and upfront with the lender regarding all         financial obligations during the application process. Anything that is not disclosed will          certainly be discovered by the underwriter during the approval process."      

 

Financing issues, appraisal issues, and home inspection issues, as well as the new TRID rules, are all reasons that can cause delays and even the denial of a home loan. Borrowers should not apply for new lines of credit, or finance anything during the purchase of a home, and consider allowing 45-60 days for a loan to close in order to avoid problems. Anyone looking to buy a home requiring financing should plan for potential closing delays. 

 

         Contact Troy Erickson, Realtor®, Diverse Solutions Realty

                                Licensed Residential Realtor® in Arizona at 602-295-6807

                         for Chandler, Ahwatukee, Tempe, and Gilbert, Arizona Real Estate.

 

Check out our website for all Arizona Real Estate and Homes For Sale in subdivisions like Sun Lakes, Ocotillo, Lakewood, Mountain Park Ranch, Pepperwood, Circle G Ranches, and many others throughout the East Valley.

                                      I help people Buy, Sell, and Invest in Real Estate!

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This post is for informational purposes only and should not be construed as legal advice. If you desire specific legal or tax advice, please consult the appropriate professional. The opinions expressed here represent my own and not those of my employer. Troy Erickson will not be held liable for any errors, ommissions, accuracy, validity, currentness, suitability, completeness; or any losses, injuries or damages arising from its display or use.

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Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Elva, while I think it's important to set customer expectations, I think it's better for us to  plan for no delays, and so do the competent lenders and title companies who get my buyers to closing.

Feb 02, 2016 09:20 AM #1
Rainmaker
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Elva Branson-Lee
Solid Source Realty GA - Atlanta, GA
CDPE - Atlanta Real Estate & Short Sale Agent

No delays are the goal, always Patricia Kennedy , and are the usual outcome. But in my area and with so many short sales and other distressed sales over the past several years, the NAR statistic seems to run true. Perhaps in the new normalized market, this will be less true.

Feb 02, 2016 09:12 PM #2
Rainmaker
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Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Los Angeles CA

I do not understand why some listing agents make such a big deal about few days of delay. Some lenders move slower and we can not possibly push them, even if we all really really want to be done by an initial closing day. 

Feb 27, 2016 03:55 PM #3
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Elva Branson-Lee

CDPE - Atlanta Real Estate & Short Sale Agent
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