Different
states have different procedures, with some being more involved than others,
and therefore taking more time. There are many online resources that list guidelines for each state.
A closing can seem to take forever when you're excited about moving into your new home.
One
factor that can make a huge difference in the time it takes to close is whether
the seller of the home needs to purchase a new home before they close on their
current home. This could take weeks or months, depending on the local real
estate market. If it’s a buyer’s market – more homes for sale than buyers
looking – it probably won’t be nearly as long as if it’s a seller’s market –
more buyers looking for homes than there are homes available. When buyers negotiate
the offer they will know whether the seller needs to purchase a new home before
closing. This is something that can be negotiated, especially if the buyers are
not comfortable waiting for the sellers to find a new place.
When
purchasing new construction, the home is sometimes not finished when an offer
is made. Some buyers want this so they can select the final colors and
finishes. As long as construction stays on schedule this won’t influence the
closing time. If delays occur, because of inclement weather or a delay getting
materials, this can cause the closing to take a little longer.
Pick the finishing touches when purchasing a new construction home.
Once
buyers make an offer on a home they will usually want a home inspection. Almost all inspections will uncover small
items that need to be fixed, such as adding a smoke detector or fixing a sticky
closet door. At times the inspection will uncover major problems with the home.
These can include anything from a leaky roof to a damaged septic tank. When
serious issues are uncovered the buyers and sellers will negotiate the best way
to move forward. Sometimes buyers will accept a credit at closing to fix the
problem, or get a reduction in the price they are paying for the home. When
this happens the attorneys and Realtors will negotiate back and forth with
their clients. This could take a few days. Other times the buyer will insist on
having the sellers fix the issue before they will purchase the home. This will
take extra time as the sellers need to find a licensed contractor. If it’s a
major repair they might need to get permits from the local building department.
It will also take time to do the repair and get it inspected again to ensure
the problem is resolved. If the home needs a new roof or a septic repair it
will take longer than if there is a leak in the bathroom sink.
Home inspectors complete a general inspection of the entire home, but they are not
specialists in any given area. If an inspector has concerns about the plumbing,
electricity, or roofing, he/she will likely recommend buyers call in a professional
who specializes in that area. This could take a few days or a week. If problems
are uncovered the buyers and sellers will negotiate, as described above.
A home inspector will look closely at a home's interior and exterior spaces.
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Permits
are another area that can hold up a closing. Perhaps the sellers don’t have a
permit for the shed or garage addition on the home. In this case, the sellers
will need to go to their city/town and file for the appropriate permits. This
can take days to weeks, depending on what the permit is for and how busy the city/town
office is. Sometimes the seller may have purchased the home with that shed or
addition and not known about the permits. This is often a quick fix as the
permits are likely on file with the city/town.
After
an offer is made on a home, the bank will send out an appraiser to make sure
the home is worth the purchase price the buyers are paying. Most times the home
appraises in the range of the sale price. If it doesn’t the buyers and sellers
might need to re-negotiate the price of the home. Buyers are not going to pay
more for a home than it’s worth. In addition, a bank will not approve a loan
for an amount over the appraised value of the home. This can cause a slight
delay as paperwork needs to be modified to reflect the new price.
A nicely landscaped backyard can add value to a house.
When
an offer is made on a home there are many activities going on behind the
scenes. For example, a title search is run; the bank works on finalizing the
mortgage; and buyers purchase homeowners insurance. Most of the time these
processes go smoothly. At times there can be delays. A title search may uncover
problems in the past that need to be addressed before the home can close, such
as a lien on the property. In terms of the mortgage, there may be conditions
that need to be met – submitting appropriate documents or providing proof of
income. If these conditions aren’t met it could result in the bank delaying the
final mortgage approval, and therefore the closing date. Buyers also need to
purchase and provide proof of homeowners insurance. This is usually a simple
task.
Homes
can be purchased using a variety of mortgages, or even cash. If buyers are
using only cash, this can speed up the closing process because there is no
mortgage to deal with. On the other hand, some mortgage programs, such as
first-time home buyer programs, VA, or FHA loans, can have more stringent
requirements. This could extend the time it takes to close on the property. For
example, with an FHA loan the house being purchased needs to meet certain
specifications to qualify for that loan. A quick example is that a house may
need to be connected to city water, or have a well that’s a certain distance
from the house and from the septic. These need to be verified before the house
can close with that loan.
A
home can be a house, townhouse, condo, or co-op. When purchasing a townhouse, condo,
or co-op there are often specific guidelines that must be met. There are
additional steps involved, such as making sure the complex provides enough
insurance on the exterior of the building, as that is their responsibility. Lenders
require this insurance for mortgages. Buyers purchase their own insurance to
cover the interior of their unit. Attorneys will review this, along with the
community rules and guidelines, and the cost of these community amenities,
often referred to as the Commons Fees, or HOA Fees.
Condominiums and townhouses allow for home ownership without the exterior maintenance of a house.
Most
of the time, negotiations for any of the above situations will occur between buyers
and sellers and their respective attorneys and Realtors. Occasionally, a home
could be sold as an estate sale. The owner of the home is deceased and relatives
of the owner are in charge of selling the property. If there are multiple
relatives selling a home this could make negotiations a little more difficult,
causing delays.
In
addition to estate sales, there are also short sales and foreclosures. These homes
are often in various stages of disrepair because they have been vacant for a
period of time or the owners ran out of money to finish repairs. Since the bank
has full or partial ownership of these properties, buyers will be dealing with
the bank as the seller, and sometimes sales done this way can take longer. The
bank has its own rules and procedures to follow, and the bank will determines
what price they will accept for the home.
Sellers
will occasionally list their home on their own, without the help of a Realtor.
In this case, sellers need to also do the work of a Realtor. This can save some
time if the sellers are on top of the process. If the sellers are not familiar
with selling a home this could cause delays as they might not be knowledgeable about
the steps or the documentation needed.
There
is always the possibility of unexpected events occurring in your area that
could influence the closing process. One example in 2020 was the global
pandemic. With the country, and the world, coming to a halt, many offices and
agencies were closed – banks, real estate agencies, attorneys, building
departments, and town offices. Many home sales came to a standstill or a very
slow crawl because it was difficult to get the proper documents, or meet with
attorneys and Realtors. Another unforeseen event would be a devastating
hurricane or tornado. Luckily, these events are not common.
The
final event before a closing is the walk-through. This is when buyers take a
final look around the home and make sure everything is still in the condition
it was promised. If there are any discrepancies this can lead to a postponement
of the closing.
A final walk-though is one of the last steps of the closing process.
Finally,
as far as the actual closing process itself, closing day, this usually takes
1-2 hours and is often done at a local attorney’s office.
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