When a real estate closing is pending, emotions can run high. Few things are more frustrating than having your real estate closing delayed, but it’s a common scenario that you can prepare for and avoid. In this article we’ll walk through five concrete reasons why your real estate closing might get delayed and what you can do to avoid it.
#1. Issues With Appraisal
Before a lender will commit to financing a home, the house must first be appraised. If you don’t know, appraising a house basically means having a professional examine it to determine its financial worth. If the appraisal comes in below the agreed upon selling price, many lenders will not make the loan, which can delay your closing and may even jeopardize your deal. In hot real estate markets like Nashville, this is not uncommon.
There are several ways to avoid this problem. Whether you are a buyer or a seller, if you know that the sale price is above the appraised value of the home, consider a cash-only sale, and avoid dealing with a lender altogether. Or, if you are a seller, make it clear that you cannot agree to a sale that is contingent on the buyer obtaining financing.
#2. Issues With The Title
In real estate deals, the title (or “deed”) to a property is the most important document that will be at play. A title represents ownership of the property. Before the title of a property can be transferred to a buyer, your real estate lawyer will need to conduct a thorough title search to make sure that there are no liens, discrepancies, or defects to consider. If no such issues are found, then the title is considered to be “clean.”
If your real estate lawyer finds that the title is not “clean,” the real estate closing will be significantly delayed, if not canceled all together. Most issues (but not all) that could arise with the title of your property can be remedied, but they will take time. The best way for you to avoid having your closing delayed is to have your lawyer begin the title search process as early as possible.
#3. Issues With The Survey
A “survey” is a clear, informative diagram of the physical boundaries of your property: the sum of everything that is being sold. The most common issue that arises in this department is an encroachment or boundary dispute with an adjacent property. Encroachments are not uncommon, but need to be resolved before the sale is closed.
Both property owners need to be involved in resolving encroachments. To avoid unnecessary delays, take a deep breath and keep a cool head. Ask the seller to approach the neighbor to discuss the situation. There are often voluntary solutions that will meet everyone’s needs without causing unnecessary delay or expense.
#4. Issues With Unrealistic Contract Dates
Generally speaking, it will take around 2 months for a real estate deal to close after the purchase contract is signed. The exact amount of time depends on a number of different things, including the type of financing the buyer is using, the number of contingencies in the purchase contract, and etc.
Obviously everybody wants their real estate deal to a close as soon as possible, but you need to be realistic about how long that will take. Keeping in mind the potential delays we just discussed, you need to be careful that your purchase contract is structured in a way that will accommodate any bumps in the road you might encounter. Setting an aggressive closing date for a real estate purchase is a great way to cause stress down the road. You can save yourself that stress by setting a realistic date for your closing that gives you time to work out the kinks.
#5. Issues With Contingencies And Home Inspections
Most residential real estate deals have contingencies. Some are fairly standard, such as ownership of title, home inspections, and obtaining financing. Some are less common, such as making repairs to the property, or the buyer selling their current house as a condition to closing. And home inspections often highlight issues that buyers will ask sellers to address prior to closing. The failure to meet a contingency is a common reason for delaying a closing.
The best way to avoid delay is to limit the number of contingencies that you agree to. And, if a problem does arise, think carefully about how important it is, and be prepared to negotiate. For example, if a home inspector finds 10 things wrong with the property, you may decide that only 1 or 2 are really important. Or, if a seller is reluctant to address each issue, perhaps a slight reduction in the purchase price will solve the problem. A cool head and careful negotiation may help you avoid a substantial delay in closing on the property.