Real estate transactions are complicated and stressful, and buyers and sellers eagerly anticipate the closing date stipulated in their contract. It is wise to temper your expectations, however. If you’re buying or selling a home, you may find your closing date delayed for any number of reasons.
This article will review some potential causes for real estate closing delays. If you’re aware of the obstacles you could encounter, you’re less likely to be taken by surprise.
The #1 Solutions for Real Estate Professionals!
Manage your client base and home warranty information with our Real Estate Portal:
- Set up coverage for home warranty plans in minutes!
- Email order confirmations to clients, title agents, and others!
- Join our ‘Realtor Referral Program’ and earn points that can be redeemed for rewards and prizes!
How Long Does a House Closing Take?
The average home sale takes 30 to 45 days. This timeline applies to standard transactions that require mortgage applications, appraisals, inspections, and insurance. Cash transactions that don’t require a lender can close much more quickly. Conversely, sales that include first-time buyer programs or backing from the Federal Housing Administration involve more paperwork and can consequently take two months or more to close. The personal needs of the buyers or sellers can also contribute to a closing taking longer than usual.
Many people could abide a prolonged closing if they had anticipated it. Unexpectedly delayed closings are often more frustrating. Here’s why you might find your closing delayed.
The 5 Most Common Reasons for a Delayed Real Estate Closing
1. There is a problem with the real estate title.
A real estate title asserts someone’s legal right of ownership of a property. This is a little different than a deed, which is a physical document. There could be title issues that even the seller is unaware of, and this can precipitate legal complications that inevitably delay a closing.
Title issues can include liens on the property or unpaid property taxes. There could be unresolved disputes over who owns or inherited the property. Fraudulent or illegal deeds are possible. Even minor errors in public records can cause significant confusion, putting a transaction on hold until everything is sorted out.
A seller may be able to get ahead of title problems by having a real estate attorney track the home’s title history.
2. The instrument survey reveals a property dispute.
An instrument survey reflects a property’s boundaries. A survey may bring to light a property dispute or boundary encroachment. For example, a fence, wall, driveway, home, or detached structure may encroach on a neighbor’s property.
Some property disputes are resolved quickly and amicably, but others can persist, putting a real estate closing in jeopardy. All interested parties must sign an affidavit that reflects their resolution of the dispute before a home sale can be completed.
3. The buyer’s lender delays or denies a loan.
Delayed financing is another common cause of prolonged sales. Buyers may be preapproved for a home loan, but they must submit a formal application with a host of personal documents before a lender will officially approve them for a mortgage. These documents often include the following:
- Income verification
- Employment history
- Rental history
- Bank statements
- Assets and debts
- Credit reports
- Personal identification
- Bankruptcy and foreclosure documents
- Child support and alimony histories
A closing delayed due to lender issues could be because the buyer is having trouble obtaining all the documents required to complete a mortgage application. The lender may also request additional information or documentation from the buyer. Another possibility is that the lender has outright denied a mortgage after a more thorough review of the buyer’s finances and history.
4. Problems arise during the home inspection or final walk-through.
Real estate experts strongly encourage buyers to arrange for a home inspection before closing on a sale. Many mortgage lenders require a home inspection. It’s certainly not a frivolous expense, for a home inspection can uncover significant safety hazards or structural problems that will be expensive to fix.
A home inspection could uncover mold problems, faulty wiring, roof leaks, fire hazards, code violations, cracks in the home’s foundation, and many other potential problems. Even a minor issue can put a closing on hold until the seller resolves the problem to the buyer’s satisfaction.
The buyers may also discover a problem for themselves during the final walk-through of a home. They may observe problems with the plumbing, electrical, or HVAC systems, or notice that the sellers didn’t perform an agreed upon repair or concession. This too can push back the date of the closing.
5. There is a discrepancy with the home’s appraisal value.
Mortgage lenders mandate a home appraisal to confirm that a property is worth its sale price. The bank’s appraisal value must match or exceed the home’s sale price. If the appraisal value falls short, the bank will delay the closing.
Sellers could simply bring down their price or complete home repairs to increase the property’s value. Buyers could front the difference between the appraisal value and the original sale price. The parties could also contest the appraisal. Whichever the eventual solution, the closing date will likely move further into the future.
What Are the Consequences of Delayed Real Estate Closings?
Buyers who miss their agreed upon closing date could be at risk of a delayed closing penalty. This could be a per diem fee due to the seller or the forfeiture of the buyer’s earnest money deposit (the amount of money buyers put down as evidence of their financial ability to purchase a home).
Delayed closings can also result in a breach of contract, allowing either party to walk away from the deal. An aggrieved seller may also sue the buyer for financial damages, or vice versa.
Warranty Support During Real Estate Transactions
A home warranty has the potential to help with some of the causes of a delayed closing. A warranty can ensure the swift repair of an appliance or system, for instance, which may resolve a problem discovered during the inspection or final walk-through.
Warranties may also increase the sale price of a home or attract more buyers, expediting a sale. Use our site for a free quote on a buyer’s or seller’s home warranty. You can also call (866)-442-0653.