July 21, 2021
Since there are several moving parts along with many parties involved in a real estate transaction, it comes as no surprise that closing delays frequently arise. Find out the top 5 reasons residential real estate closings get delayed and how to avoid those pitfalls.
A recent survey conducted by the National Association of Realtors (NAR) found that 29% of real estate transactions were delayed due to issues with financing.
If buyers didn’t get full preapproval and were only pre-qualified through the lender, after full review, they may be denied or approved for significantly less. The lender may also discover that the original information the buyer provided wasn’t completely accurate or they may find credit issues that were unknown or not reported.
Very often there are delays with financing because the lender did not receive the proper documents or information in a timely manner. This impedes the underwriting process which can, with a domino effect, delay the real estate transaction by weeks.
Knowing which documents are needed and when they are due can help avoid setbacks in the transaction process. Without timely communication, documents can sit for weeks without anyone seeing them, ultimately slowing down the process and causing frustration for the buyer and seller.
Appraisal roadblocks are a common reason for the delays. Lenders typically require that the property has a minimum market value and condition before financing it. An appraisal that comes in below the contract sales price means lenders typically won’t approve the loan. This can delay the closing and feasibly compromise the deal.
Issues with appraisals easily cause a snowball effect of confusion between all parties involved in the transaction. A low appraisal affects more than just the loan amount. It affects the deposit and final documents that need to be created in accordance with the sale of the home.
The confusion can be overcome and processing through to a resolution can best take place with all necessary participants communicating synchronously in real-time to instill confidence in the process.
Many buyers don’t think much of the title process when purchasing a home. However, title issues, even minor ones, left unresolved until at or near closing can bring the closing process to a grinding and extended halt.
The purchase of a property is actually the purchase of title to a property by way of a deed, which is the main document involved in the real estate transaction closing.
A property typically is not transferred to a buyer, and a lender won’t lend funds, without a title insurance company conducting a thorough title search to make certain, there are no liens on the property or discrepancies to consider. If there are no issues the title is deemed clean. However, if it is discovered that there is a defect or open issue with the title, then it is not clean and cleaning it, or clearing the defect, will take time.
Typically, the title search occurs after other contract conditions are satisfied and can occur towards the end of the deal, making time of the essence. Each day matters and knowing whether or not the title searches have been reviewed and cleared for closing is imperative.
Knowing the process and status of review of this typically behind the scenes process is the best way to avoid a title issue from delaying a closing date. Being mindful of deadlines and knowing with whom to communicate on details such as title defects eliminates an incredible amount of stress and wanted time.
Inspections are conducted to identify the property’s condition, including whether it meets building codes or buyer’s reasonable expectations. Inspectors report on minor items like an aesthetic concern and major items like a structural defect. In certain cases, a lender may require certain conditions, like the existence of a leaking oil tank, be addressed prior to the loan being cleared to close.
Buyers generally request an inspection clause to be included in the purchase contract. This gives them the option to have a professional inspect the home and review whether to have defective items addressed.
The time required to hire the home inspector, as well as the home inspection due date can pass without the parties even being aware of the deadlines.
The process of inspection, reporting, and final negotiation, if necessary, of repairs or credit agreements can be longer than expected. The final steps of documenting the outcome and having credit agreements approved by a lender can sometimes escape otherwise very capable professionals. Failure to track and follow up on completion of these items can undoubtedly delay closing.
Although many issues can arise through the real estate transaction process, the biggest complaint is the lack of communication. Real estate transactions are communication intensive. There can easily be 20 different responsible participants involved in the closing of a home. With so many participants, any delayed or missed communication can have a near devastating effect on the outcome of the closing.
While a real estate transaction is in essence an upfront agreement on purchase price between a buyer and a seller, there are typically 10 to 12 steps that must be accomplished to get from contract signing to closing. Each step has a professional, or team or professionals, to assist. For example, the lender, title insurance company, and home insurance provider. With most communication done via text, email and phone, important participants can be left out, which leaves huge communication gaps.
The opportunity for a breakdown or delay in communication between participants is endless. Such breakdown or delay can derail the required timing of other requirements. Communication between all relevant participants and team members is key.
Reti360’s web and mobile platform digitize real estate transactions from contract signing through closing. Agents, transaction coordinators, brokerages, service providers, and housing consumers all connect on one workflow of all steps needed for each participant to accomplish. Shared calendar, document management, and sign-off ensures that agents and housing consumers know they are clear to close on each step. Reti360 sends simple alerts of what tasks need to be accomplished. Agents connect their trusted service providers with clients to streamline the engagement process. All this in one free and easy-to-use platform.
Using Reti360 will reduce the stresses on buyers and sellers, save time for agents and the other professionals involved, and ensure a smooth closing.