You may want to brace your clients: Closing glitches can be fairly common.
The three biggest causes for a closing delay:
- Buyer financing setbacks
- Home inspection issues
- Appraisals that are different from the agreed-upon contracted sales price
That’s according to a survey conducted last month by the National Association of REALTORS® of more than 2,600 real estate professionals who were reflecting on their sales and purchases for the previous three months. The survey found that 32 percent – or nearly one-third – of all real estate transactions encounter some type of delay to closing.
Of those real estate professionals who say they’ve faced delays, 46 percent say it was caused by “financing issues,” up from 40 percent during the first half of 2015, according to NAR’s survey. Appraisal problems prompted 21 percent of the delays, and issues that arose from home inspections triggered 14 percent of the postponements to closing, the survey found.
Read more: REALTORS®’ Top Concerns Heading into 2016
For about 6 percent of the deals, the buyer and seller eventually never made it to closing and the deal fell through completely. Home inspection issues and financing problems were cited as the primary reasons why.
The most common reasons financing falls apart in the last minute is that credit scores can change between loan approval and closing, says Whitney Watson, a loan officer for First Heritage Mortgage in Glen Allen, Va. Buyers must avoid taking on any additional credit while they wait until closing – which means, for example, not making new furniture expenditures on credit and buying a new car on credit either.
Also, Watson says another common reason for financing to fall through is the debt-to-income ratios changes if the loan underwriter later discovers a buyer had not disclosed ongoing payment obligations, such as child support.
A new survey from Ellie Mae released this week shows that it takes an average of 49 days to close on a residential mortgage loan in December. A year prior, the average days to close was 42 days. November was the first month that many closings were affected by the TILA/RESPA Integrated Disclosure rules, which took effect Oct. 3.
Source: “One-Third of Realty Transactions Are Plagued by Delays, Some of Them Fatal,” The Washington Post (Jan. 20, 2016) and “Average Time to Close Increases By a Week for December: Ellie Mae,” National Mortgage News (Jan. 20, 2016)