Avoid the hiccups that cause delays -- and cost money -- on your way to closing.
Clear to Close -- are there any sweeter words? One of the first things you learn as a real estate agent is that the transaction isn’t over until it’s over; there are a variety of ways that closings can be delayed or even cancelled. Part of your responsibility as an agent, whether you’re representing the buyer or seller, is to help your clients successfully proceed through the time period between the initial offer and the closing date.
We’ve put together a list of the most common obstacles you’ll face in getting to the closing table, along with the ways that you can help your clients navigate this important part of the buying or selling process.
There are a variety of ways that finances can go south during the underwriting process. Buyers take on new debt by financing a new car or a house full of furniture. An unpredicted layoff occurs, changing the buyer’s financial picture, work history, and income. Buyer agents must be clear up front about the underwriting process and the way that any changes can jeopardize both timing and approval.
On the seller side, an anticipated move may not materialize -- at least not within the expected timeframe. This can alter all of the numbers and create a need for an extension, with additional changes to the taxes, insurance, HOA fees, and other charges. Timely communication is key on both sides in a situation like this, along with a willingness to accommodate each other and offer reimbursement for the inconvenience as appropriate.
An appraisal comes back on the low side, requiring thousands of dollars out-of-pocket to keep the deal together. An anticipated home sale does not occur, causing the buyer to delay the purchase or obtain a bridge loan.
There are so many reasons that a contingency might not clear in the predicted timeframe or fashion. It is sometimes tempting to think of contingencies as standard and to take them for granted, but it is vital that you discuss each type of contingency with your clients, including what happens if the contingency doesn’t clear as predicted. This way, you will have a plan in place and an understanding of your client’s preferences before the worst occurs.
In addition, it is important to remember your fiduciary duty to your client. Remind them of the terms of the contingency and ensure that they meet deadlines for negotiation and notification. Whether they decide to proceed with the purchase or not, help them determine what is in their best interest throughout the process.
We’ve all attended walkthroughs on the day before or the day of a closing, only to find that the sellers are still in the process of packing, repairs have still not been made, or unwanted appliances, playsets, or sheds have still not been removed. This can throw buyers into a tailspin, especially if the transaction has been difficult throughout.
It is vital that you become a facilitator in this case, stepping in to help streamline the process as needed. If you have a reliable repairman or haulaway service, it might be worth a couple of hundred dollars to keep things moving forward rather than delay the closing and risk the loss of the deal -- and thousands of dollars in commission.
Your carefully detailed home inspection response called for a variety of repairs both large and small. Now, you’re at the walkthrough and finding that those repairs have been completed by the homeowners in a shoddy and haphazard fashion -- not at all what you or your buyers had in mind.
First, be sure that you specify whom should perform repairs when you respond to a home inspection. You may want to ask for a specific company or contractor, especially in the case of a highly specialized repair, or you may just ask for “a licensed professional” service provider.
In some cases, you may find that the approved service provider is so busy that he or she is unable to complete the repair in time for the closing. In this scenario, you can either ask the sellers to pre-pay for the repair and provide a scheduled service date from the contractor or you can ask for a credit at closing sufficient to cover the repair.
In many markets, buyers tend to default to asking for closing credit rather than asking for repairs. That way, they can ensure that the repairs are done correctly by a service provider of their choosing. Many sellers prefer this as well, since it saves them the trouble of scheduling, accommodating, and supervising repair crews or contractors.
A home that was shown with furniture, paintings on the wall, and rugs in every room will look very different from a completely empty home. This can result in unwelcome surprises at the walkthrough. Some buyers become so upset at nicks in the paint or dirty bathrooms that they may want to delay or even cancel the closing.
It is important that you discuss the seller’s obligation with your buyer when you make the initial offer. Different states have different requirements for the property condition, and may only require “broom clean” conditions. If your buyer’s timeline is tight, he or she may want to schedule a cleaning crew to come in as soon as the closing is complete and before the movers arrive.
If actual damage has been done during the move-out process, sellers may be asked to provide additional funds at closing. In most cases, though, this type of scenario all comes down to the motivation of both the buyers and sellers to continue with the process. If it seems that no one is willing to budge, it might be smart for you to have your handyman make a quick repair in order to keep things moving toward closing.
Part of the sales contract should specify which elements will stay with the home, including appliances, light fixtures, and other extras. If your sellers are planning to take something with them -- like a chandelier or upgraded appliances -- they should either have the items removed and stored prior to listing or specify in the agent notes that those do not convey.
Should the buyers ask for items to convey which are not considered fixtures -- like custom lighting, appliances, furniture, or outdoor items -- these should be noted in the sales contract and included in the negotiated price. The listing agent should remind his or her sellers of these items, especially as they are packing and beginning the moving process.
In the event that there are items missing at the final walkthrough which were not excluded, the sellers should either
● replace the items and repair any damage caused by their removal prior to closing or
● include funds at closing, either through a credit or a cashier’s check, to cover the purchase and installation of the replacement, along with repairs for any damages caused by their removal.
This type of discrepancy can create bad feelings between the parties at closing. Being proactive and aware on both the buyer and seller sides can help to ensure that misunderstandings like this do not occur.
Should a catastrophic storm, wildfire, or other natural disaster occur during the time leading up to closing, the lender may request a reevaluation of the property for damage. This could involve another appraisal or inspection, resulting in a delay in closing.
Ensure that your sales contract includes a description of the process involved in the event of this type of delay and that you explain the process to your clients. Be proactive in communicating with them before, during, and after such an event, ensuring that they are able to make changes to their moving plans as needed in order to accommodate shifting timelines.
Keeping a close eye on the moving parts of the transaction and communicating clearly with both your clients and the other real estate agent can help you proceed to closing in a smooth and seamless manner. Remember, your calm demeanor, experience, and expertise are among the most important factors in getting everyone to the closing table.