It isn’t sold until it closes

Most home buyers and sellers are only vaguely aware of what a closing is. Here in Minnesota we close at the table which means that the buyers and sellers get together and sign documents. Checks, keys and often best wishes and advice are exchanged. Either party can choose to “pre-sign” and skip the closing and that happens too. Occasionally so much animosity has built up during the buy/sell process that buyers and sellers opt to close in separate rooms.

In Minnesota purchase agreements (contracts to buy a home) have to have a closing date in them. Closings do not always happen on time. The most common reasons for a delay is delayed loan approval. There are a ton of reasons for this too and no penalty to the lender for a delayed closing.

Closings are usually held in a conference room at a title company. Even though I run a fairly paperless business closings involve a lot of actual paper documents and often require copiers and believe it or not fax machines.

On homes that are financed prior to or during the closing money is wired to the title companies trust account and that money is used to pay for the house. Checks for the proceeds of the sale are cut and given to the sellers. The actual closing usually takes an hour and buyers will be doing most of the signing because of all of those loan docs.

Title companies provide title insurance for buyers and they make sure the necessary documents get filed with the county. They also send money to the sellers mortgage company to pay off the mortgage and they prepare these wonderful settlement statements that show all of the charges buyers and sellers pay when the buy or sell real estate.

Working as a closer requires a license. Closers are the people who make sure every t is crossed and i is dotted.

Some home buyers and sellers let their lender of real estate agent recommend a title company and others search the internet looking at prices. Either way buyers and sellers always have a choice. Usually the closing takes place at the buyer’s title company. Closings are often scheduled for Friday at the end of the month.

After the closing we can usually find out how much the home sold for.

Interest rates are falling

We have been expecting interest rates on home mortgages to rise but they have been falling since the “brexit” vote last week. On Monday, the 30-year fixed-rate mortgage averaged 3.46 percent, near the lowest average since late 2012,® reports. In other good news the number of homes on the market in St. Paul is slowly rising giving buyers a few more choices but inventories are still at historic lows.

Freddie Mac mortgage rates

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.

Closing date

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.

Where is the money?

Mortgage lenders are not all the same but I don’t imagine most of people who are buying or selling homes have all that much experience with home mortgages. There is a difference. The difference in interest rates and fees from one lender to the next isn’t all that much but the difference in service is huge. There is a reason why I recommend certain lenders. It is because I know that if they send a pre-approval letter they will come provide the funds for the purchase and they will be on time with that money.

A huge part of my job these days is staying on top of the mortgage approval process. There really isn’t a penalty for the loan officer or the lender if the closing is delayed for weeks but delays really mess up the lives of home buyers and sellers.

Before choosing a lender ask around. Real estate agents know which lenders are easy to work with and which ones keep their word. In a multiple offer situations it is easier for me to recommend an offer to a home owner if I have had good experiences with the lender the buyer is planing in using. If I have had bad experiences I let the seller know.


Avoid fake wiring instructions

Don’t take the bait

On March 18 the FTC Consumer Blog issued a post focused on hackers who have been breaking into some consumers’ and real estate professionals’ email accounts to get information about upcoming real estate transactions. After figuring out the closing dates, the hacker sends an email to the buyer, posing as the real estate professional or title company. The bogus email says there has been a last minute change to the wiring instructions, and tells the buyer to wire closing costs to a different account. But it’s the scammer’s account. If the buyer takes the bait, their bank account could be cleared out in a matter of minutes. Often, that’s money the buyer will never see again.

If you are buying a home in Minnesota assume that requests to wire money are bogus if they are coming from real estate agents. Be very suspicious of  wiring requests from anyone asking for closing costs.

We do have a system called “TrustFunds” for electronic earnest money payment but most local real estate agents don’t seem to want to use it. A link is sent to the buyer to TrustFunds so that the earnest money can be paid electronically which is super handy for people who don’t write checks.

As a listing agent I have gotten all sorts of weird emails from people who want access  to my bank accounts so they can send me money to pay for homes I have listed . . ya . . . right.

Mortgage rate over reaction

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Mortgage rates in2005

The Federal reserve raised the benchmark interest rate by .25% yesterday. That doesn’t translate into a .25% increase in mortgage interest rates but even if it did the new rates would only add a small amount to monthly house payments on new mortgages.

Mortgages rates will rise but I think the real estate industry is over reacting. In 2005 rates were more than 2% higher than they are today. More homes were sold that year than will be sold in 2015. Average home prices were higher in 2005 than they are now too. Rents however are higher in 2015 than they were in 2005.

No the sky isn’t falling. It is even possible that the housing market and the economy is recovering from the great recession. There have been times in recent history where both home prices and interest rates were higher than they are today and people bought and sold houses.

The stock market responded positively to the rate increase as did world markets.

I think the way the rules and regulations for borrowing money have tightened up is far more of a threat to first time home buyers.