Closing Day Delays: 4 Common Ways Things get Pushed Back
Your closing day is rapidly approaching, and you are becoming quite eager to sign the final papers and move in. To your dismay, the real estate agent calls about a delay of days or even weeks. It turns out you missed something along the way.
Closing day delays are quite common, and here are four situations you should watch out for. Every situation is slightly different, so you should consult with your agent and/or lender to see what actions suit your needs best.
1. Home Appraisal Scheduling
After you make an offer and proceed with a home inspection, you need to satisfy the bank’s home appraisal requirement. This task proves to the bank that the home is valued at approximately the offer you made, so that your lender is not giving you a mortgage that far exceeds the home’s actual appraised value.
However, it can be somewhat difficult to schedule an appraiser to come to the house, and you cannot proceed without it. In fact, a recent study indicates that on-time closings dropped from 77 percent to 64 percent from April to September, 2016, and home appraisal delays represented about half of the delayed closings. With this in mind, try to schedule your appraisal as soon as you possibly can.
2. Incorrect Paperwork
As you go through the home buying process, you will sign a very great deal of paperwork. The onus is on you to read it carefully from the beginning, even if you are looking at a document you have already read in a previous incarnation. All paperwork for the sale of the home and the mortgage are legally binding, so inaccuracies should be addressed as soon as you spot them. The Consumer Finance Protection Bureau requires a three-day notice to borrowers on certain changes to paperwork, including:
- annual percentage rate increases of more than 1/8 of a percent
- new prepayment penalties
- changes to the loan type, such as from a fixed-rate loan to an adjustable-rate loan
Other concerns may cause slight delays to your closing date, but ensuring that the paperwork is correct may be worth the time. You can likely request a contingency in your original offer that will protect you from a kick-out clause if the paperwork takes longer.
3. Mortgage Delays
Unsurprisingly, your lender may cause a number of obstacles to your closing date. Whenever you have paperwork that several people must look at to confirm accuracy before the money is handed over, you have the potential for delays. It could be as simple as the bank closing early, or otherwise not sending over the final paperwork to the real estate agent so you can sign the final settlement papers.
In some cases, other delays cause you to run out of time for the interest rate lock you arranged with the lender. Such an occurrence requires the lender to negotiate a new mortgage interest rate and create new paperwork based on the new rate, which may require days or weeks. This is a reason why some request a lock of longer than 30 days, especially if they are not almost ready to close.
4. Title Concerns
Before the seller can transfer ownership of the home to you, the title must be free and clear, and there must be no liens on the property that are not resolved by the home sale itself. No one wants to be unpleasantly surprised, so most home sellers will work hard to ensure that they can transfer the title of the home to you without incident. However, mistakes happen, and sometimes there are liens on the title that the seller did not expect. All liens should be resolved before the sale can continue.
Once you receive a closing date, you should remember that the expected closing date might not be the actual day you receive the keys to your new home. With these four common closing day delays, you can plan for a smoother home buying process.