It's Time To Move Your Contract Period to 45 Days

By
Mortgage and Lending with Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, NMLS #138061 MMCD #1141

It's Time To Move Your Contract Period to 45 Days

 

PSA for real estate agents across the country - 45 days is officially your new 30 days.  Think it's a benefit to go 30 days?  Well, with the yield curve on treasuries officially inverting today, we're officially in a refinance boom.  What does that mean?  Longer turn times for lenders - literally every lender in the country is experiencing an influx of refinance volume - at levels I've NEVER seen before.  


Time to close a real estate sale

The last time rates were this low, consumers had nowhere near the levels of home equity they currently do.  Last time they had home equity in the amounts they currently have, rates were closer to 6%.  We currently have the perfect storm of huge rate drops (down from the 5's last November to the 3's today) immediately following a 24 month period of extreme home appreciation.  For home owners, this means the time is now to refinance  -either for rate/term refinances or cash out refinances (rarely is the market primed for both to offer such huge benefits).

 

For real estate agents, this means you're setting yourself (and more importantly, your clients) up for failure if you're still pushing 30 day (or if you're feeling muy loco, 21 day) escrow periods.  

 

Lenders might still be telling you they can get stuff done in 30 days.  And the reality is, they probably can (I can still, as of today, close a loan in 3 weeks) - but the margin for error we used to have is gone.  Our operations teams (by our, I mean our entire industry's) are maxed out - applications are up, pipelines are bulging, and turn times are being effected.

 

If your option is to push for escrow periods of 30 days and almost guarantee a stressful closing for just about every party involved, or to set your escrow period at 45 days and ensure everyone is happy, all deadlines are met, and expectations are exceeded, WHY would you choose the former?  Don't do it.  

 

The verbiage everyone should be using is "45 days or sooner, if all parties agree", in any and all contracts where that's possible - and the biggest responsibility is for listing agents to properly explain this to their sellers.  Buyers agents are still feeling the pressure of "our offer won't get accepted with more than 30 days" in many hot markets with tight inventory, so they're still going to push for 30 or 21 day escrows.  Lenders, feeling the pinch and afraid of losing the business, will agree to this - and then everyone will be pissed off come closing time because deadlines are being missed or things are happening but at the very last minute.

 

Listing agents need to be the ones to set the escrow period longer, and communicate why to their sellers - set the expectations low, and exceed them, rather than trying to force something to happen that is in reality setting yourself up for failure.

 

The average time someone spends in their home is 9 years, or 468 weeks.  Delaying entry by less than 2 weeks is not going to make or break most people or most transactions, and if you enjoy your reputation and prefer less stress over constant panic, my very strong recommendation is to begin using 45 days as your new benchmark for the home sale transaction.

 

Want to work with a lender that's keeping on top of market conditions and exceeding expectations?  Give us a call at 484-680-4852 or bring your questions to an expert for immediate answers!

Comments (43)

Dave Rosenmarkle
Highland Realty, Inc - Arlington, VA
33 years of providing fully satisfying service!

Thanks, John. I prefer the 45-day window just to be certain all the t's are crossed and there is sufficient time to deal with the inevitable last-minute final underwriting issues to be addressed. 

Aug 15, 2019 06:13 AM
Anonymous
Eric Geiger

In our Commercial agency we most always use the language, "on or about xx-xx-xxxx" this gives us the space to adjust if needed, now keep in mind we are usually not dealing with a couple things. 1. Participants in a transaction held tight by moving personal items in and out of a location. 2. At times property tax and or insurance pro-rations. But it seems in this current time frame, being up front with everyone about have a little more time, takes some of the stress away. Also, after working with individuals, there are times you may need to stick to a tight deadline in order to keep things moving.

Aug 15, 2019 06:50 AM
#24
Ron Aguilar
Continental Mortgage - Saint George, UT
Mortgage & Real Estate Advisor since 1995

Here is a possible solution. Let the LO do a complete 1003, gather all docs and use a wholesale lender like UWM that has their shit together. People I have been doing this for 24 years and we are still talking about the same fear. Go back to work people...

Aug 15, 2019 07:01 AM
John Meussner

Ron Aguilar I don't know where to start about how wrong you are??


Is UWM (or any lender) insulated from market fluxes?  No.  Can they force appraisers to only work with them and not get busy and extend their turntimes?  No.  Can they force title companies to move faster than the title company can move?  No.  


 


What fears are you even talking about?  There's no fear - there's a very real market movement, and this post is intended to give people a heads up and to make appropriate changes that could and would benefit their clients and make their lives easier.  No fear, just reality.

Aug 15, 2019 11:41 AM
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello John- - -being realistic matters. A lot. 

Aug 15, 2019 08:13 AM
Bill Morrow
Keller Williams of Central PA - Mechanicsburg, PA
Bill Morrow, Associate Broker

Your advice is appreciated, however this time frame is lender, borrower, and market driven. An open line of communication with the lender as well as the closing (settlement) company is necessary from day one. The biggest question mark is the appraiser and how quickly they respond to their end.  Our Agreements are "On or before" for settlement dates. However, experience shows that the date written is the banks decided date and an earlier close never happens.

Aug 15, 2019 09:30 AM
John Meussner

That's a shame, Bill - - I alwys try to hit the "or before" period. As soon as we're clear to close I let everyone know - more often than not, they choose to just wait until the last day, but we always like to give them the option to go early.

Aug 15, 2019 11:37 AM
Wayne L. Brown
Franklin Advantage Inc. - Alpine, CA

John

I'm still closing in 21 days, but it certainly is Not fun for sure.

I keep preaching your message to my agents about longer time periods to be realistic, but many choose to ignore my recommendations.

Just sets them up for more stress in case we go over a few days, and have to extend the escrow period.

Well thought out post.

Hopefully the agents will finally realize our situation is a sign of current times.

Aug 15, 2019 09:38 AM
John Meussner

That's where we are too, Wayne - still getting them done but pipelines are getting bigger --- pretty soon we'll certainly have a log jam of appraisal orders to contend with as well

Aug 15, 2019 11:36 AM
Monica Hill
RE/Max Associates - Wilmington, DE
the REALTOR to help you discover Delaware

Good post and a great reminder to agents to be aware of the rest of the pieces in the transaction, as opposed to just entering numbers on an agreement that might not have any basis in reality.

Aug 15, 2019 09:46 AM
John Meussner

Exactly, Monica!  Better to exceed expectations than not be able to meet them

Aug 15, 2019 11:35 AM
Nick Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtor, Philly Main Line

Thanks for the heads up, most of our local lenders are still saying they can do quick turns. But always stressful and dependant on the buyer getting all their information in and filed often.

Aug 15, 2019 10:35 AM
John Meussner

We're still 21-30 days on most files, but the times they are a changin' ----- rates went down further yesterday and today, more refis will be clogging the pipeline next week : )

Aug 15, 2019 11:35 AM
Monique Ting
INET Realty Honolulu, HI - Honolulu, HI
Your agent under the sun

I appreciate the warning! I just closed a buyer transaction where we asked for a 45 days close and the sellers insisted on a 30 days. After confirming with the lender we agreed to the 30 days since the buyer was pre-approved and had all of his papers in order, only to be faced with delays on the underwriter's end that eventually led to the 45 days close. It was very stressful for my first-time buyer and I would not recommend that...

Aug 15, 2019 11:32 AM
John Meussner

Exactly the type of thing we want to avoid, Monique Ting , thanks for sharing your story!

Aug 15, 2019 11:34 AM
John Van Hogen
Keller Williams Realty Professionals - Hillsboro, OR
Serving Sellers / Buyers / Investors 503-680-9390

John, I recently read that many of the large banks have decide to not hire additinal staff to handle the current refi boom. Hiring costs them money, and they know they'll just let them go after the boom has passed. More log jam please.

Aug 15, 2019 02:09 PM
John Meussner

Hi John, I don't think it's possible to hire fast enough to help, honestly - - last time rates dipped this much it took months, this time it's taken just weeks.


 


What I've found personally here is that hiring people helps, but training them takes manpower away from departments doing the work, so the training of new hires adds to the problem before it helps fix it.  


 


We are hiring, approving OT left and right, and managing to still keep things moving along well, but only with the additional effort ----- in our industry though, these are the good challenges to have : )

Aug 15, 2019 03:27 PM
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Flower Mound, TX
Selling Homes Changing Lives

John Meussner - Thanks for the heads up! I have not heard anyone talking about this in my area yet. But I did get a letter from my bank today advertising it is a great time to refinance. Times are changing!

Aug 15, 2019 03:11 PM
John Meussner

Yes they are - the next 12 months should be refi heavy, so it'll help to leave a little extra time in contracts - especially as appraisers get backed up

Aug 19, 2019 05:41 PM
Peter Mohylsky. Broker Associate
Miramar Beach - Santa Rosa Beach, FL
THE BEACH IS OPEN AND WAITING FOR YOU

Interesting discussions here, I understand both sides of this issue but still want to close as soon as possible when a property goes under contract.  Purchasing a home is very emotional and buyers and sellers can change their minds quickly. 

Aug 16, 2019 04:20 AM
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Calabasas CA

I usually aim for 30 days or sooner since it is often a multiple offers situation, but I always call a lender first to make sure they did their job and not just gave me a preapproval without seeing the full docs package first. But even with that we just lost 2 different escrows since lenders found surprises after the offers were accepted.... wasted everyone's time:(

Aug 17, 2019 12:54 AM
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

I do ask what's realistic when writing up an offer - we are still around 30 days. Your analysis makes sense though since the process is dependent upon many players, the buyers being proactive with their paperwork, appraisers, any lender needed repairs...lots of refi loans will certainly put pressure on everyone. 

Aug 17, 2019 06:07 AM
John Meussner

Exactly - we're still moving things in less than 30 days, but we're already seeing appraisers in some areas quoting 10-14 days, where the same areas were at 4-5 days not too long ago.

Aug 19, 2019 05:40 PM
Leanne Smith
Dirt Road Real Estate - Golden Valley, AZ
Relocation to NW AZ with elbow room & more freedom

Great advice John Meussner For my clients I usually give 45 days especially if it is residential.  In rural areas if there is a well, solar, along with the house and termite inspection, the due diligence period can easily be 20-25 days before the appraisal can be ordered.  Currently home inspectors are running 10-14 days out for appointments. Even land in AZ carries a 30 day due diligence period.  I always right in the contract a statement about closing early if both parties agree and escrow is given 3 days notice.  With VA, 45 days is cross your finger because of the appraisors.  They too are overwhelmed and may take another week to write up the report. If anything needs to be corrected, then they must return to verify those corrections.

Aug 17, 2019 07:53 AM
John Meussner

Definitely smart to leave some room for all the things that can (and inevitably, will) come up when there are so many moving parts!

Aug 19, 2019 05:40 PM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good afternoon John Meussner,

So glad to see this post featured in Carol Williams Second Chance Saturday series and see it also received a well deserved featured post. Great advice..I just wrote an offer that was accept last week and with Labor Day we wrote in 45 days for a conventional 30% down and everything is moving right along!

Aug 17, 2019 01:49 PM
John Meussner

Yep, give us 45 days and we'll close it in 30.  Give us 21 days and we'll try to close it in 21, but odds are it'll be a little more stressful with less margin for error along the way!

Aug 19, 2019 05:39 PM
Andrea Bedard
Thompson Company, REALTORS® 240.593.2860 - Silver Spring, MD
Fluent in German and Real Estate * M.A. ABR ASP

I appreciate your post and heads-up John! As a listing agent I do prepare my sellers and advise when a timeline seems awfully tight. However, my issue is with lenders who overpromise to then underdeliver (delay). I check in with all LOs of offers received before I present to my sellers and ask how they feel about the timeframe. I trust them to be honest with their answer, unfortunately, some aren't. Big promises and "no big deals" and "I do it all the time, I'll make it happen"... and then they ask for an extension the day prior to closing. *sigh* I prefer an honest "it's too tight, another 5 days would give us more time and ensure a smooth process". Now that is something that my sellers would appreciate, too! 

Aug 17, 2019 03:11 PM
John Meussner

Thanks for the feedback Andrea Bedard , I'm honest with everyone - YES, we can do it.  But when there's no margin for error, I let them know that ,too.  Agents and lenders just need to communicate whatever is going to make the process smooth for the clients involved.

Aug 19, 2019 05:38 PM
Margaret Rome Baltimore 410-530-2400
HomeRome Realty 410-530-2400 - Pikesville, MD
Sell Your Home With Margaret Rome

Just because it can be done in thirty days, it does not have to be! Put in 45 days and if it goes earlier, everyone wins! 

Well deserved feature! Thanks for the good info John Meussner 

Aug 19, 2019 06:07 PM
Rose Mary Justice
Synergy Realty Pros - Dandridge, TN
Synergy Realty Pros

Thanks for the heads up. The market is hot in our area. Lenders are busy so you just may be right on this one.

Aug 20, 2019 03:31 PM
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Experienced Agent in Kansas City Metro area

I would never agree to a 30 day close without talking to the lender first!

Aug 21, 2019 01:26 PM

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