There are a million things that need to go right in order to close the sale of your home. However, settlement delays happen for various reasons. You might be surprised to know that 32% of the settlement delays occur due to issues with buyer financing which can happen at the very last minute. Here is a list of the most common things that might go wrong at closing.
Debts or Liens against Your Title
Your house title isn’t meant to be a piece of paper. Think of it as a collective term for all the legal rights that allow you to use, own and sell your property. Needless to say, the title needs to be clear before you can legally sell your house. It is needed to validate your ownership of your home.
Once you accept the buyer’s offer, the title company that’s involved with the transaction will do a title search to make sure that your title is legitimate and there are no remaining issues or debts that may have been overlooked. Some of the common examples of issues with title include any outstanding property or county taxes, divorce decrees, personal bankruptcies or liens by a contractor against your home. All these title issues could lead to delay in the settlement.
If you did not pay for that remodeling or re-roofing job, it’s a possibility that it will show up as a lien against your home which means you won’t have a clear title. In short, buyers want a clear title. They do not want to inherit any of the unpaid debts or deal with any other issues when buying your home.
Surprises during Final Walk-Through
Buyers usually come for a final walk-through around a week before the closing. The final walk-through by the buyers is to ensure that they are going to take possession of the house in the condition in which they expected. Usually, it’s a formality if everything is fine. However, buyers will get in touch with their agent in case they discover a missing refrigerator that was supposed to be part of the purchase or there is a gash on the kitchen counter which wasn’t there when they decided to make an offer.
If you decided to take that stove with you or you decided to take down the window treatments without telling your buyers, it can become a problem. In case you promised certain repair work to the buyers before the final settlement, and it hasn’t happened, it will become a problem. Similarly, if you promised the buyers to update all the non-compliant outlets to GFCI, you need to make sure it’s done before the final walk-through. Keep in mind that a lot of things can go wrong between the contract and closing, and it is your responsibility, as long as you are the owner, to make sure that your house is functional and everything is in good working order before the final walk-through by the buyers.
Miscommunications – Move in Day
Communicate with the buyer clearly about the move in date. Don’t let a situation happen where you still haven’t moved out but the buyer has already arrived with their things – ready to move in.
Buyer Financing Failure
There are some situations where the buyer might lose their qualification for a loan before the closing date. They might lose their only source of income unexpectedly. If they decide to put on huge debt on their credit card in order to furnish the house before the closing date but the resultant increase in debt load might cause the lender to reconsider whether they’ll be able to make the mortgage payments. Keep in mind that over a third of the closing delays happen due to buyer financing issues.
Issues with Paperwork
The Closing Disclosure (CD) is the name given to the collective paperwork which clearly outlines the closing costs associated with the transaction as well as terms of the buyer’s loan. The mortgage lender or the title company is required to send this closing disclosure to the buyer at least 3 days before the closing to allow the buyers to review the document thoroughly and to have a clear understanding of the terms. The transaction won’t close until the buyer has received the disclosure and has signed it on time. In case the closing is scheduled to happen on a Thursday, the closing disclosure should be in the hands of the buyer by Monday. If that doesn’t happen, the final paperwork will have to be rescheduled.
When you sign the contract, you’re not going to read everything line by line as a real estate transaction involves a lot of documents. A lot of things can go wrong such as wrong addresses and misspelled names along with completely unanticipated fees but all this can be avoided right at the beginning.
Closing Isn’t over until It’s over
Hire an experienced real estate agent to handle things you cannot control. An experienced real estate agent has usually seen it all – be it unexpected fees, missing furniture, the buyer’s mortgage financing falling through just before the closing or move in day mix-ups among other things. It’s better to be prepared for things that could go wrong just before closing. However, you can prevent that by double-checking every single detail and the agreement. Don’t forget that the deal hasn’t closed until the buyer has the keys.