when is a closing date not a closing date?
It used to be that once a transaction had survived attorney review, after buyers had completed their inspections and parties had agreed how to handle any inspection issues, and assuming the house appraised at or above the contract price, you could pretty much count on a deal closing on or about the date indicated in the contract.
Unless it’s an all-cash deal, not anymore.
The lenders are the problem. About 73% of real estate buyers need financing to complete their purchases. We all know that during the boom, banks extended mortgage loans on the flimsiest of evidence that borrowers could make the payments. Until the music stopped, banks were making loans based only on credit scores and sometimes only on a buyer’s word with respect to his income and assets (the so-called “no doc” or no documentation loans, also called liar’s loans for obvious reasons!)
lenders taking their time, double-checking everything
Now that the party’s over, lenders have overcompensated, tightening their qualifications and increasing their scrutiny of a buyer’s finances to an almost laughable degree. For example, banks now almost always run a buyer’s numbers one more time a couple days before closing, just to make sure nothing has changed in the few weeks since they last did that. You can imagine the delays this can cause.
my client Naz at the closing of her beautiful new house in West Windsor last July
I’m certainly not against a bank performing its due diligence (as they should have been doing 5-10 years ago!) but you can tell the banks are not set up to provide this level of scrutiny, because they cannot meet their deadlines. Mortgage commitments routinely come in weeks late, even when buyers have dutifully provided (many times, more than once) all the required documentation in a timely fashion. And even once the commitment is in, you can wait weeks longer for the lender to issue a so-called cleared to close letter authorizing the closing to be scheduled.
In the meantime, agents, attorneys, buyers and sellers call and email each other every day to see if any progress has been made…this morning I’m waiting to hear whether a house I sold in Jamesburg back in July will finally close this Friday. It was originally supposed to settle on August 30th, and we’ve been waiting for the bank ever since…