It’s All About The Timing…

Whether you’re buying or selling, the time it takes from accepted offer to the closing table can be a major headache. The average home buyer spends around four months house hunting and looks at approximately 20 homes before closing a deal. Here’s how long the process takes and why.

How Long Does It Take?

The actual time it takes to close escrow on a house is generally around six to eight weeks. This is because it now takes between 30-45 days to fund a loan. And while you’re waiting for the loan money, you’re also waiting for the title company, appraiser, inspector, and termite guy as well.

Naturally, as part of the closing process, it’s absolutely essential to find the best loan officer and title company to speed up the process. As a buyer, you probably won’t get to choose the title company, but you can absolutely choose your loan officer — And you better choose wisely! Because issues getting the loan funded can mean a huge delay in the process.

To Reduce The Timeframe…

  • Know exactly what you want in a house
  • Find a great real estate agent and loan officer
  • Work with your loan officer to figure out exactly how much you can afford
  • Work with your real estate agent to pinpoint and offer a realistic price for a property
  • Hire an attorney who is dedicated to finalizing the closing process as quickly as possible

Do Your Homework

To get an approximate timeframe for the closing process, do some homework, and shop around for a professional real estate agent. Ask friends, neighbors, and work colleagues as well as financial advisers for positive referrals to attorneys. Just know, if you choose me as your real estate agent, the attorney’s one you can trust.

What Could Delay The Closing Process Of Buying Or Selling A Property?

Unfortunately, there are numerous reasons that could affect and delay the closing process of buying or selling a home. A buyer or a seller of a property can never be absolutely sure a deal is done until the “t’s” are crossed and the “i’s” are dotted.

Here are some of the most common problems that buyers or sellers could encounter through this period and what can be done to prevent them in the first place.

Termite Inspections Can Cause Delays

If the home has termites, the seller will have to treat it before the sale. This is because the vast majority of mortgage lenders in the US insist on having a pest inspection to make sure there is no serious damage. And if pests are detected, the deal could fall through. This is because insects, termites, and carpenter ants can quickly eat through wood leaving it infested and unstable — And the bank wants to protect its investment from these critters.

Luckily, the cost of pest inspections to the property buyer is usually around $100 or less. If pests are found, the cost of treatment could be more, depending on the severity. If the problem is minor, it can be remedied locally. But if the problem is more severe, the property may have to be tented. And if pest problems are too severe, and the seller won’t pay to remedy them, then the buyer has the option to walk away as long as the purchase agreement has the correct contingencies.

An Appraisal Can Cause Delays

A lender will also have a property appraised in order to protect their investment. The bank will want to make sure that the home is actually worth what the buyer is borrowing for it. The bank wants to make sure that they can recoup their losses if anything goes awry.

The rule of thumb is this: If an appraisal comes in too low, the seller will have to reduce the asking price or the buyer will have to pay cash for the difference. So for example, if you and the seller agreed to $500,000, but the bank’s appraisal comes back at $480,000, then the bank will only lend you $480,000. In this case, you would either need to pay the difference out of pocket or walk away from the deal — As long as you have the correct contingencies in place.

Cold Feet Can Cause Delays

An established real estate agent will make sure that there is a contract in place outlining justifiable reasons for a buyer or seller to back out of the deal without a penalty. This could include things like failure to waive a contingency or not meeting a deadline.

But if the buyer decides, after waiving the contingency, that they don’t want to go through with the purchase — maybe because they have found a better property — then they will lose their earnest money. This is only fair, because the seller should be compensated for the time that their home was off the market.

Alternatively, if the seller decides to back out because she has a change of heart — or a better offer was made for the property — the buyer has the legal right to collect damages from the seller as well. This is when a good attorney should be consulted.

Financing Can Cause Delays

One of the most common reasons for delays is when buyers don’t qualify for financing. Making an offer for a property without getting financial pre-approval can be a major mistake. It’s surprising how many buyers don’t acquire a written loan commitment from a bank or a mortgage lender before submitting an offer — But it happens all the time.

Likewise, a seller should never accept offers from buyers who haven’t been approved for financing. This puts the entire closing process at risk — especially if the buyer has falsified documents on their loan application.

Other reasons for financing delays include:

  • Increased interest rates
  • Buyer loses a job
  • Buyer’s credit score goes down
  • Major purchases such as furniture, car, etc.

An Uninsurable Home Can Cause Delays

If the seller has made a major insurance claim on their property — such as water damage or mold — this will probably show up on insurance records. Some insurance companies may refuse to insure a property if there’s too much risk.

At the end of the day, if a home is not insurable a buyer won’t be able to make an offer unless they are paying cash. Let’s face it, it’s not a good idea to buy an uninsurable home anyway, so seek the advice of an experienced real estate agent if any problems like this come to light.

The Closing Process Can Cause Delays

Once an offer on a home has been accepted, the inspections are complete, and finance is in order, the next move is to focus on is the closing process.

Closing day involves the formal and legal requirements of transferring ownership of a property from the seller to the buyer. Regulations can vary from one state to another, however the following two aspects are usually the same.

A contract should allow the buyer to schedule a walk-through of the property 24 hours before closing. This is intended to ensure that the seller has completely vacated the property and the home is in the condition which has been described in the contract.  I always encourage buyers to schedule two walk-throughs, the latter being an hour before closing.  The reasoning — items that were there before have a habit of not turning up right before closing.

Any outstanding repairs should have been completed and everything is in place for new occupancy. If the walk-through does reveal any problems, it can delay the closing process — Or the buyer can ask the seller for money to address the issues. Again, just one more reason why reputable professionals come in handy!