What does a settlement date really mean?

It is a bit ironic that I am writing this after an ‘on time' closing this evening....only the second one of the year though. One of the biggest changes I have noticed in the last year is that sellers and buyers have really needed to be flexible when it comes near closing time.

Lately it has seemed that the date stated on the contract is hardly ever the actual closing date. It has not been uncommon for the actual closing to happen a day or even weeks later. Despite our pleas to our clients to remain flexible, when things change (and always last minute) everyone is inconvenienced.

So as I marveled at my perfect closing today (and thanked my lender a thousand times, feel free to ask for his name), I wondered when did the real estate professionals start looking at a closing date as an estimated time. I always prepare my buyers and sellers alike that things can happen and often there are last minute items that can delay closing. This is just part of managing expectations, but when a settlement is delayed then so many parties are inconvenienced. Buyers and sellers take time off work to sign the paperwork, agents and attorneys are left shuffling already full schedules and heaven forbid there is a coinciding settlement....a total disaster.

So we are left asking why is this becoming the norm? In all honesty it not always the lenders fault. I have personally had settlements delayed for many reasons: inspection items not addressed, title issues, travel/work plans and of course...funds not arriving on time.

We can all agree that stricter lending practices contribute to many of the delays. Appraisal issues  not getting resolved until the last minute are probably second on the list. Title defects (with bank owned properties not having signed paperwork, multiple owners in complicated LLC's for investors) are also near the top of the list as well. Here are some of my suggestions on how to avoid many of these issues.

•·         Work only with reputable lenders. I know we have all heard this before, but ask your Realtor. They close more deals than your friend who bought a house 3 years ago. That was an entirely different era and believe me, the only thing Realtors want is a deal that closes.

•·         Work only with knowledgeable Realtors. Much of the work we do is after we stop driving you around to view properties or holding your house open. Good Realtors know what questions to ask of lenders, appraisers, title attorneys, etc. Good realtors should follow up with all parties weekly and have status reports frequently. We also are on top of our contingency periods and should not miss deadlines.

•·         Have the appraisal ordered right away. It used to be ok to wait until after home inspection. After all, who wants to spend money on an appraisal if the inspection doesn't look good. However, these days it can take a week or two to get an appraisal back after it is ordered. If it comes in too low then it is back to the negotiating table and loan processing stops.

•·         Get your lender whatever they ask for within 24 hours. Most lender will give you a list of documents they know they will need. Others may come up at the last minute. Do not delay when they ask you for something because the entire package needs to go to underwriting.

•·         If you are buying a home, be frugal with your money until after closing. It's a little secret not many consumers know about, but the bank will most likely pull your credit right before closing. Think that shopping spree on your credit card is not a big deal, think again....you may have just altered your debt/income ratio. No major purchases until you buy the house.

•·         Disclose any tax issues up front. If you have not filed your taxes or owe money the bank will find out and it will be a problem. It's called a 4506-t and it has caused many deals to fall through.

•·         All parties need to be honest. Chances are if you are hiding something it will come out. This goes for sellers, buyers, Realtors and lenders. Bad news must be delivered immediately. Maybe there is a fix that one of the other parties involved can help with. Nothing will frustrate everyone more than a "last minute issue". Especially if they believed it should have been picked up on or disclosed earlier.

Hopefully as we get used to this new market we will be able to iron out the wrinkles and close on time...most of the time. Until then Realtors need to counsel your clients early on that "things can happen". Buyers and sellers need to understand that some flexibility may be necessary when it comes to closing dates. Every party involved truly wants to close on time, as delays cause huge inconveniences. Above all else professionals need to remember to act in businesslike manners at all times. Screaming at lenders, attorneys, processors and the other agent will only put a sour taste in the mouth of everyone....including the client's.