Congratulations! You finally found the home you love and received an acceptance of your offer. You did an amazing job prepping for this stage and feel overjoyed that your hard work paid off. As you begin to relax and imagine what room you will decorate first, it is brought to your attention that there are still several steps left in the process and that it typically takes 43 days to close.[1] You find out that 32% of all closings experience delays, while 6% will never close.[2] Upon further investigation, you uncover that almost 50% of the delays are driven by the buyer not qualifying for the final mortgage approval, while appraisal or home inspection issues cause another 35% of the delays.[2] Images of not closing now overcome your once-happy thoughts of celebration and you wonder how to avoid these issues.
The closing step of the home-buying process is very much like a track and field relay race. To be successful in either, you must have team members with the ability and motivation to keep moving, even in the face of setbacks. As a result, it is recommended that you have a strong closing team to help you cross the finish line. A good REALTOR® will not only help you get prepared, but they can also help you find a closing team with a track record of success. You can also get recommendations from family and friends or from the internet. Whatever option you choose to find your team members, familiarize yourself with the suggestions below to improve your chances of closing on the right house and on time.
Confident Home Buyer Tool Kit Tips:
Shop around and select a homeowners insurance and a title company
Refrain from activities that may result in a mortgage denial
Conduct your own inspection and hire a professional inspector
Understand the findings from the inspection and get repair quotes as needed
Understand your appraisal report and work with REALTOR® on the next steps
Respond quickly to any information requests from your lender/underwriter
Be sure to compare the loan estimates you received during the pre-approval process to the final loan disclosure. If there are any significant changes, be sure to speak with your lender to gain clarity on the differences. You can learn more about getting pre-approved in Step 8 of the Confident Home Buyer Tool Kit.
Recommendations
1. Shop around and select a homeowners insurance and a title company
Timing: Be proactive and start this process before you make an offer
Lead Team Member(s): You (the buyer), the homeowner's insurance company, the title company and your lender
a) The mortgage company will require title insurance that you will pay for during closing. This insurance only protects the lender, not you
b) For you to be covered under title insurance, you will need to purchase a separate Owner’s policy
2. Refrain from activities that may result in a mortgage denial
Timing: From the time of the offer acceptance until after closing
Lead Team Member(s): You (the buyer)
Explanation: Remember that almost 50% of delayed closings occur when the buyer no longer qualifies for their planned mortgage. Lenders will conduct last-minute credit checks to ensure you still meet their requirements. As a result, it is recommended that you avoid the following actions:
a. Do not change or quit your job, as there may be issues verifying your income
b. Do not participate in activities that can impact your credit score or financial standing, such as:
i. Buying a new vehicle, furniture, or co-signing for someone else
ii. Excessive use of your credit card
iii. Paying anything late
iv. Spending money set aside for closing
v. Changing bank accounts or making a large deposit before checking with your loan originator
3. Conduct your own inspection and hire a professional inspector
Timing: Right after you receive your offer acceptance
Lead Team Member(s): You (the buyer) and the home inspector
Explanation: Even if you did a walkthrough before making the offer, you still have the option to do another before closing. To help with the process, your REALTOR® should have a recommended checklist for your informal inspection. Be sure to take advantage of this opportunity before it is too late.
In addition, hiring a professional inspector can save you from costly repairs in the future. Your REALTOR® and/or friends and family may have recommendations for strong inspectors, but it is ultimately your decision on whom you will select to do your inspection. As a result, be sure you find out the following information:
a. Get copies of sample inspection reports to understand how they will communicate the problems they will find and how detailed they are in their inspections
b. Consider their credentials, training and experience. Find out if they have any special certifications or are members of any professional boards. You should also get details about the types of homes they inspect and the cities and counties of most of their work. You can also ask them for references
c. Ask what is included in the price. There are typically additional charges for services such as mold or radon tests. Read more about typical pricing in the article Expenses You Will Pay Before Closing
d. Be sure that you interview at least three inspectors before you make your decision
e. Work with your REALTOR® and lender to ensure the inspection is scheduled a few days before the appraisal. This way, if the seller doesn’t agree to cover any costly repairs and you believe that it is a deal breaker, you can cancel the appraisal and not worry about incurring any additional expenses
4. Understand the findings from the inspection and get repair quotes as needed
Timing: Right after you receive the inspection report
Lead Team Member(s): You (the buyer), your REALTOR® and potentially a contractor
Explanation: Depending on what your professional inspection reveals, you and your REALTOR® may have to return to the seller to negotiate a price reduction to cover costly repairs or cancel the contract altogether. Take the following steps to help with your decision:
a. To prepare for these negotiations, it is recommended that you get at least 2‒3 quotes from contractors to estimate the costs of fixing the issues
b. You can use similar questions to screen contractors as you did for the inspectors. Your REALTOR® will have additional recommendations on how to select the right person
c. Once you receive these quotes, you will work with your REALTOR® to help decide if additional negotiations are needed and what should be included
5. Understand your appraisal report and work with REALTOR® on the next steps
Timing: Right after you receive the appraisal report
Lead Team Member(s): You (the buyer), the lender, the appraiser and your REALTOR®
Explanation: The appraisal will be ordered by your lender. The appraisal aims to help the lender determine if the home is worth the price negotiated in the contract. Remember, the house will serve as collateral for the loan, so if you ever defaulted on the loan, they can recoup their money by foreclosing on the house and selling the home. You are good to go if the home appraises for the contract prices. However, if the home doesn’t appraise, you have the following options:
a. You can work with your REALTOR® to decide whether to negotiate a lower price with the seller. Keep in mind that this may be more difficult to execute if you are in a competitive market
b. If you are in a competitive market and want the house, you can pay the difference between the appraisal and contract prices. For example, if the home appraised for $195,000 and your contract price was $200,000, you would have to come up with an additional $5,000 at closing. Be aware that the seller, your lender, and REALTOR® will need proof that you can come up with the additional funding to agree
c. You can walk away from the home and find another
6. Respond quickly to any information requests from your lender/underwriter
Timing: From the time of the offer acceptance until after closing
Lead Team Member(s): You (the buyer), the lender, the underwriter and your REALTOR®
Explanation: While all your home inspection and appraisal activities are taking place, work is being done in parallel by your lender and the underwriter. The underwriter takes full legal responsibility for reviewing the loan application, so they verify everything from ensuring that documents are correctly signed to ensuring that the house's title is clear. If you are slow to respond to requests to send verification information, you may delay the process and even miss your close date, which could lead to losing the house. Stay on top of these requests and respond quickly.
7. Hire the right closing attorney
Timing: From the time of the offer acceptance until after closing
Lead Team Member(s): You (the buyer), the closing attorney and your REALTOR®
Explanation: You will review and sign many documents on your closing day. As a result, it is recommended that you select a closing attorney to ensure all the paperwork is legally sound and properly endorsed. Your REALTOR® will have insight into the top-performing closing attorneys, but you ultimately make the selection. Be sure you understand their experience levels as well as their ability to close on time. Be aware that they may also be the holder of the earnest money deposit you gave when your offer was accepted, so make sure you select a trustworthy company.
8. Obtain your final loan disclosure from your lender
Timing: By law, the lender is required to give it to you three days before your closing date
Lead Team Member(s): You (the buyer) and your lender
Explanation: The final loan disclosure will include information about the mortgage you selected, such as interest rates, loan terms, monthly payments and how much you will pay in fees. Be sure to compare it to the loan estimates you received during the pre-approval process to the final loan disclosure. If there are any significant changes, be sure to speak with your lender to gain clarity on the differences. You can learn more about the pre-approval process in Step 8 of the Confident Home Buyer Tool Kit.
As you can see, there are many moving parts during the closing step of the home-buying process and it will require having a solid team to keep everything moving smoothly. A good REALTOR® will not only have the tools to keep you on track during this stage, but they should also have recommendations for strong closing team players. Be sure to contact TruSite Realty today to learn more about our services.
Denise Johnson, MBA, REALTOR®, is often referred to as a "Data Nerd" by family and friends and has a gift for seeing the important facts of a situation. She aims to fit all the pieces of the jigsaw puzzle together into a complete picture, making it easier for herself or anyone she counsels to make sound and rapid decisions.
After 10+ years of working for multiple Fortune 500 and 1000 companies across Logistics, Finance and Marketing, Denise made the leap into the Real Estate Industry hoping to help others achieve their homeownership desires. She can remember purchasing her first home at the age of 23, and it being both a time of joy and stress because she didn't fully understand the process and the implications of owning a home. Since then, she has owned and sold multiple personal properties, including selling an investment home that turned from a Rehab to a New Construction project in 2020. She has a desire to share all that she has learned and continues to learn with future customers to tip the scales towards a joyous homeownership and home-selling experience.
When she is not busy finding solutions in business, she loves large get-togethers with friends and family, international travel adventures with her hubby, and growing her passion for gardening and cooking healthy recipes.
[1] Ellie Mae Origination Insight Report. May 2018. Link to Report
https://static.elliemae.com/pdf/origination-insight-reports/Ellie_Mae_OIR_MAY2018.pdf
[2] REALTOR® Magazine. One-Third of Deals Face Closing Delays. Link to Article
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