If you need assistance, please call 703-743-4410

How to Prevent a Delayed Closing

Friday, January 13, 2023   /   by Laura Larson

How to Prevent a Delayed Closing

bl 5.jpg

When your offer is approved, the anticipation builds as the closing date approaches. But before you can obtain your keys, you'll want to be watchful of any barriers or setbacks that could cause delayed closing and postpone your move-in date. You might reconsider getting that gorgeous new couch and postpone your plans for the backyard expansions until the title has been resolved. There are many things that might go wrong before you eventually close on your house, from problems with the appraisal to obstacles with the home inspection. How therefore may a delayed closing be avoided? Be mindful of these frequent problems to avoid pushing back your closing date.
 
What is a delayed closing
Throughout the home-buying process, unforeseen events might happen, and depending on how long it takes to fix the problem(s), it could prevent your property from closing on time. For instance, a termite inspection may reveal damage that needs costly repairs or reveals that the home's appraised value is less than what you proposed to pay for it. Although closing delays don't always occur, it's helpful for both buyers and sellers to be aware of the typical causes of closing delays.
 
Financing issues
You will require financing to buy your house unless you are submitting an all-cash offer. To give yourself a realistic picture of how much house you can afford, it is advised to get pre-approved for a mortgage before looking for a home; however, this doesn't guarantee that your loan application will be approved.
 
One of the worst-case scenarios is the mortgage falling through on the day of closing. Make sure that there are no significant changes in your financial circumstances between the time you submit your loan application and the closing date, such as purchasing a car, to avoid any financing snags or a delayed closure. Having said that, it is advised to engage with an experienced, local mortgage broker. 
 
How to remedy the situation
To avoid a closing delay or, even worse, the sale falling through, it’s essential to be upfront and honest with your loan officer. “Give your loan officer full disclosure from the start – tell us everything. There’s no judgment here as we’ve seen it all. Tell us about old overdue child support and tax liens that could pop up and end the process. Just because it’s not on your credit report doesn’t mean it’s not out there. These can take days to research and get cleared,” explains Dean Tucker of Benchmark Mortgage in Boise Idaho.
 
Before closing, buyers should refrain from making any changes to their credit reports, advises Douglas Toland Jr. of Performance Mortgage. He recommends staying away from new credit card applications, loans, and loan debt hikes. Your loan application may experience problems due to changes in your debt-to-income ratio or credit score, which raises the possibility of a delayed closing.
 
The home appraisal is lower than the sale price
The fair market value of a home is determined through a home appraisal, which is often needed by your mortgage lender. It is used to calculate the maximum loan amount and provides the lender with reassurance that they aren't lending more than the value of the home. Therefore, if the appraised value is less than the agreed-upon purchase price, the closing may be delayed because your lender might reject your loan application or ask you to make up the difference.
 
How to fix the problem
You and the seller must decide how to make up the difference because your lender will only lend you what the house is worth. Fortunately, you do have a few options, and your real estate agent will suggest the best course of action to deal with the issue and prevent a postponed closing.
 
- You can request a price reduction from the vendor.
- You can make up for the shortfall by using your own funds.
- You can work out a deal where the seller agrees to meet halfway. The seller would reduce the price in this scenario, and you would pay the remaining balance in cash.
- You can object to the appraisal and ask for a review.
 
Significant damage is discovered during the home inspection,.
A home inspection is a crucial phase in the home-buying process that aids the buyer in having a full picture of the state of the house. It serves as protection by revealing any significant problems or fixes that they might be ignorant of. Although getting an inspection is not needed, it is typically in the purchasers' best interests. In a perfect world, there would be few to no issues with the house inspection report. This isn't always the case, though. The buyer and seller will need to agree on how to handle these defects if your home inspector finds potential hazards or damage, such as structural damage, that could endanger your health or safety. Repairs could require more time than anticipated, which could delay your closing date depending on the severity of the damage and the negotiation process.
 
How to fix the problem
It can be easy to ignore any problems after you've set your sights on a house in order to get the keys in your possession as soon as possible. However, after you become the owner, it will be your duty to take care of any necessary repairs. If the repairs can be made quickly, ask the seller to finish them before you buy the house, or ask for a seller concession to help cover the cost of the repairs in order to avoid a postponed closing. In order to avoid a transaction falling through during negotiations, it is important to be as honest as you can.
 
Clouds on the title
Make sure the title is clear before you can finalize the transaction. A title search, which looks through all public records to determine the property's ownership history and spot any title encumbrances, will be carried out by a title business or real estate lawyer. Any encumbrances or unsettled claims that suggest a potential ownership issue, such as liens or unpaid taxes, are referred to be clouds on a title.
 
How to remedy the situation
If there are clouds on the title, there’s not much a buyer can do on their end besides waiting until the issues are resolved, and the title is cleared. Once this happens and the deal closes, they’ll be able to purchase title insurance, which is required by the lender. Sellers should take the initiative to prevent a closing delay. As soon as the seller receives the preliminary title report, they should take care of any problems. Title companies recommend advising your title or settlement agency about any IRS tax liens or bankruptcies that affect the seller or the property in order to prevent any problems or delays.
 
Delayed approvals from Homeowners Associations
There may be extra hoops to go through and paperwork to fill out if you're buying a house that is a part of a Homeowners Association (HOA) in order to properly close on your new home. According to Dean Collura, CEO, and co-founder of TitleTap, "Not all HOAs are the same, and in certain circumstances, they demand the permission of the home acquisition."
 
How to fix the problem
The easiest approach for a buyer to prevent a postponed closing because of delays in approval is to deliver HOA applications and other paperwork or orders early in the closing procedure. As the deadline draws near, it's critical to keep a careful eye on the situation and check in occasionally.
 
The buyer can't sell their home.
A typical contingency is a requirement that the buyer's current house be sold before accepting the offer. If a buyer already has a home, they will frequently have to sell it before closing on a new one. This clause gives the buyer the option to back out of the agreement if the sale of the present home goes through or if it doesn't sell before the agreed-upon closing date.
 
How to fix the problem
When negotiating a contract with a house sale contingency, a seller might exercise due diligence by looking up the typical days on the market in the neighborhood to get an idea of how quickly their home will sell. Additionally, they can price their house affordably for a rapid sale. However, if the sale of their house takes longer than expected, this could postpone the closing or, worse yet, imperil the entire transaction.
 
The seller might insert a kick-out provision contingency in the purchase agreement if the buyer has problems selling their house, allowing them to keep marketing it and looking for a higher offer. Additionally, this puts the seller in a stronger position to haggle should a second offer come in.
 
Problems are discovered during the final walk-through
The buyer will have the chance to go over the house one last time after the seller vacates it before assuming ownership. A closing could also be delayed if you and your real estate agent run into issues during the final walk-through, such as agreed-upon repairs that weren't finished or damage that happened during the move-out process.
 
How to fix the problem
There is a good likelihood that unmet contingencies during the final walk-through may cause the closure to be postponed. To make sure that any contingencies are handled, your real estate agent should be in constant contact with the seller's agent. In order to prevent the purchase from falling through or a delayed closing, the seller can potentially make additional concessions.
 
Is a postponement of closing usual?
Don't worry if there is a delay in closing; it happens frequently. According to a poll conducted in 2021, 26% of real estate brokers reported closing delays over the previous three months, whereas just 5% reported contracts that had been canceled. Although it's not ideal, problems can usually be resolved swiftly with the help of an experienced realtor and the collaboration of both the buyer and the seller.