Anticipating problems before they happen will help your closing stay on track. Having a contract is just the beginning. Between 10 percent and 14 percent of pending real estate transactions do not close. Another 20 percent are delayed, according to a Realtors Confidence Index survey conducted by the National Association of Realtors®.
Setting realistic client expectations and educating your clients about possible issues that can occur at closing are essential- from buyers who may not qualify for a loan to delays with title. Most hurdles that delay or prevent a closing fall into three main categories, which include:
1. Loans & appraisals
3. Home inspections
New lending and closing regulations have resulted in more delays. Having a thorough understanding of the rules and allowing time for compliance will help you get over this hurdle. Changes to the federal Truth in Lending Act and RESPA have slowed down the closing process. The updated HUD-1 form adds a few more hours of document preparation.
Lending rules have also made it harder to close on time if circumstances change late in the deal. Amendments to the Truth in Lending Act require a three-day disclosure period if a borrower decides to change the loan amount or anything else that can change the interest rate.
To prevent delays, avoid last-minute changes whenever possible. If the matter is out of your control, the best thing you can do is help your client have realistic expectations about how long the transaction will take.
Title defects are another major closing hurdle, but one that can be avoided with the proper preplanning. Adding a checklist to the purchase contract can help identify issues that can hinder a title- basically anything that can be tied to the property such as bankruptcies, oil and gas leases, etc. Short sales and bank-owned properties are particularly prone to title issues. HOA fees and unpaid repair costs can have an effect on the title and delay a closing.
If a home inspection uncovers serious issues, the time it takes to negotiate which party pays for repairs and gets estimates, can result in big delays for a closing. Alerting buyers to possible high-cost repairs and suggesting that they factor those potential repair costs into their offer can help minimize post-contract negotiations.
By focusing in on these most common closing hurdles, you can successfully take control of your transactions and master the close!
Attorneys’ Closing Services (ACS) assists everyone from the sole practitioner to fully-staffed offices. We offer full service processing for commercial and residential attorney title agents. Whether your office needs assistance with full or partial closing processing services, ACS stands ready to assist you at a moment’s notice. ACS is owned and operated by Ronald J. Conte and David H. Trevett, practicing attorneys who have more than 50 years of combined experience in the fields of law and real estate. We would be honored to work with you on any and all of your real estate closings. To learn more, click here or call us today at 407-270-8855 to see how we can help you.