Real Estate Closing Delays & How to Actually Triumph Over Them
Real estate closing delays easily make an already stressful process even more tense. Waiting for your new home to close is an involving process. There are numerous moving parts. These include appraisals, title searches, and more.
For first-time home buyers, it is important to recognize that the process requires a somewhat lengthy timeframe. However, there are a few issues that could contribute to further real estate closing delays.
Property Title Issues Cause Real Estate Closing Delays
Title searches are designed to protect prospective home buyers. Unfortunately, title searches may reveal issues. These title issues often pertain to unpaid taxes, outstanding debt or liens, and previously unknown property claimants.
Ultimately, title issues need to be resolved, which can cause real estate closing delays. A property’s title problems usually lead to additionally owed funds. While this will not always lead to renegotiation, title issues might.
Title clearance is a routine aspect of the real estate closing process. Regardless of whether you are refinancing or signing on for a new mortgage, unresolved title issues must be cleared prior to closing.
Real Estate Closing Delays Based on Finances
The real estate closing process largely revolves around finances. Before a home purchase goes through, the lender will typically have a third-party appraiser evaluate the property. The goal is to ensure that the home’s value is at least equal to the loan amount.
In addition, prospective home buyers must undergo a credit report. Both facets serve to not only protect the lender’s interests, but also the prospective home buyer’s ability to pay back the loan.
Low Property Appraisals
Ideally, property appraisals will at least meet the property’s loan value. In the event that the appraiser deems the property value to be lower than the purchase price, the transaction will screech to a halt.
Usually, the real estate transaction continues after at least one of the below criteria is met:
The homeowner lowers the price to meet the lower appraisal.
A second opinion appraisal deems the value higher and closer to the sale price.
The potential homebuyer puts more money down to lessen the risk for the lender.
This situation can bog down the process, leading to real estate closing delays because the lender wants to ensure that the home is valuable enough. From the lender’s perspective, the goal is to warrant the loan amount while agreeing the property is in good condition to meet the loan standards.
Changing Credit Reports
Aside from the property valuation, credit reports similarly impact the real estate closing process. At the beginning of the purchase process, prospective home buyers usually go through credit preapproval. This indicates to the homeowners that the potential buyer has the ability to pay for the property in question.
As prospective home buyers embark through the closing process, opening new lines of credit is inadvisable. This very easily contributes to real estate closing delays. When home buyers open new lines of credit, take out loans, or run a large balance, they appear less likely to have the financial bandwidth needed to pay for the property.
In conclusion, any of these actions may lower the credit score. Subsequently, buyers may be disqualified from mortgage approval.
Home Inspections Could Discover Unknown Problems
Similar to property appraisals, home inspectors audit the home. However, home inspectors differentiate in their end goal. Whereas home appraisers care about the overall property price, home inspectors focus on property livability and safety.
During a home inspection, undisclosed problems may arise, leading to real estate closing delays. When this occurs, oftentimes, home buyers and home sellers renegotiate the final home price. In addition, contract contingencies and property credits tend to resurface. Therefore, the final real estate closing date moves backwards till the renegotiation ends.
Typically, this results in one of a few resolutions:
The seller makes repairs before closing.
The seller credits the buyer in the amount of the repairs so they can be made after closing.
The seller lowers the sale price to account for the repair cost.
The seller and buyer decide to continue forward with no changes despite the issues with the property.
The transaction is cancelled.
No matter the outcome, this type of situation will delay the closing of a home until the end of continued negotiations. It is also possible that the closing delays until repairs finalize.
While many factors contribute to real estate closing delays, home buyers and home sellers control whether they mitigate the impact. For guidance on navigating real estate closing delays, schedule an appointment with a real estate attorney at Lee Scott Perres, P.C.
