There is a myriad of things that can complicate the closing of a real estate transaction.
This cautionary note is not meant to cause undue stress, but there are some things to consider.
Just when you think you’ve crossed the finish line and you are near the final step of signing papers, it seems to move farther away. Some closings are very much like a never-ending story.
There are at least ten reasons why a closing won’t happen or will be delayed for a few days or will be stretched out:
10. The Seller’s deal falls through. Usually, sellers take the money from the sale of their home and use it to pay for another home. Your seller is likely to do the same. But if the seller’s deal falls through, he or she may have no place to go and might have second thoughts about the closing. In other words, the seller might refuse to vacate the home. If this happens, you have three options:
(1) don’t close until the seller moves out;
(2) close and force the seller out, which is emotionally, physically, and legally time consuming;
(3) hold back money from the closing to ensure the seller gets out by a certain date and attach a stiff daily penalty (sometimes governed by local custom) for every day he or she remains in the home. The daily penalty should be so stiff that it would be cheaper for the seller to put all of his or her belongings in storage and go to a hotel.
9. Catastrophe strikes. In the days (or nights) before the closing, nearly every first-time buyer has a nightmare about his or her new home being destroyed before the paperwork is finalized. Fire, flood, earthquake, lightning—you name it. What happens if a fire actually consumes the home you’re supposed to purchase tomorrow? In most cases, depending on what the contract says, you wouldn’t have to close if something major happened to the house. Or, you can elect to take the home and the insurance proceeds. (Of course, this would be after the seller’s lender has been paid off, and if the home is under-insured, that could mean little or nothing for you.) If you have already taken possession of the home when disaster strikes, you may lose the right to terminate the purchase and be forced to close. Again, your attorney can advise you of your rights.
8. Someone dies. It doesn’t happen too often, but you should know what can happen if either you or the seller dies after the contract is signed and before the closing. If the seller dies after signing the contract, the estate must go through with the sale. However, it may be difficult to close on time, particularly if the seller dies close to the date of the closing, or if the estate is in probate court. If you die, the seller may be able to force your estate to continue with the sale, pay damages or lose your earnest money—although in the real world, sellers probably won’t force the issue. Check with your attorney for details about your rights in your state.
7. Title Problems. Last-minute title problems may creep up. A long-lost relative turns up or the title company discovers the real estate taxes haven’t been paid or there is a tax lien against the property. A contractor may have filed a mechanic’s lien. Insist these title issues are resolved before you close on the home. You don’t want to inherit someone else’s problems.
6. Walk-through problems. If you do the final walk-through (ideally, after the seller has moved out) and find that some items are missing or damaged, it should be brought up before the closing. This is the time to negotiate with the seller (or seller’s attorney or broker, if the seller isn’t available) for remuneration. You and the seller should agree to a settlement before you close.
5. Last-minute requests. Sometimes, the lender will make a last-minute request for documentation at the closing, such as a copy of the canceled deposit check. To safeguard against time-wrenching delays, it’s a good idea to bring everything with you to the closing.
During your loan process make sure the lender receives all the documentation they require, in a timely manner.
4. Incorrect loan documents. Nothing can create greater problems than incorrect information on loan documents. Check to be sure that you’re actually getting the amount of money you agreed to, and that your address, phone number, and other personal information are all correct. Be certain the interest rate is correct. Bring inconsistencies and wrong information to the attention of the lender. New documents may have to be drawn up, or the lender may try to get by with correction fluid. Just make sure you walk away with copies of the documents that are correct.
During the loan process make sure the lender has your name spelled correctly, including any initials you want included. Also make sure the address of the property is correct on the loan documents your lender provides.
3. Disagreements about documents. Read all of the documents carefully before you sign. Don’t execute documents that contain verbiage you did not agree to, make sure what you are signing is what you have on your Good Faith Estimate.
2. Missing loan package. If the documents aren’t there, you’re not closing. Lost overnight packages can delay a closing. Missing documents may have to be sent by messenger from another office.
1. Money problems. If you’re transferring money by wire, there is always a possibility the money will get tied up, or there will be a delay in the processing of the wire transfer. Sometimes the numbers don’t add up, and title companies don’t take personal checks, so buyers have to run across town to get a personal check converted into a certified or cashier’s check.