Delayed closings

Delayed real estate closings are almost as common as on time closings. There isn’t any penalty for lenders who can not make the closing date but for buyers and sellers there are penalties. Sometimes a seller can not close on a home they just bought. Occasionally families have to move out of a rental and have no place to go.

The loan officer will tell the buyers that he/she can handle the closing date but there are many other departments and parties involved in the process. It isn’t unusual to check in with the lender the week before the closing and find out everything is on track only to find out the week of the closing that it will be delayed.

Closings on any kind of condo or townhouse are far more likely to face closing delays than other types of real estate sales. In some of the downtown condo buildings it has gotten ridiculous.

Buyers and sellers need to understand that closings are more likely to happen on time if there are at least 45 days between the time the offer is made and the closing date. With condos allow at least 50 days. Closings are more likely to be on time with conventional financing and if the buyer is making a large down payment like 20%. However is it possible to have an on time closing with 3.5% down and an FHA loan.

Sometimes closings are delayed for hours, or days or even weeks.  Month long delays are not very common but it can happen.

Some lenders blame the new TRID (TILA RESPA) rules which require the final numbers for persons borrowing money to be available three business days before the closing. I think it is more complicated than that and if there were some penalty to lenders for delayed closings there would be no such thing as a delayed closing. It makes sense to have “delayed closing” rules and laws as part of any consumer protection law that affects mortgage loans on home purchases.

Home buyers and sellers need to understand that a home sale or purchase may not close on time but most will probably close eventually which isn’t useful information when scheduling a move. Sometimes buyers can get the sellers to agree to an early move in date. Other times the sellers can not move because they need the proceeds from the sale of their home to close on another home. One delayed closing can impact several closings.