6 Reasons Your Real Estate Transaction Could Get a Delayed Closing Date
January 22, 2022
If you’re presently buying or selling a house or are interested in doing so, the closing process of real estate is a critical part to understand. A real estate purchase agreement, as well as the criteria and circumstances outlined in it, are extremely important, but an agreement does not mean the transaction is concrete.
With the real estate purchase agreement, both the buyer and the seller agree on a date to close the deal. However, the agreed upon closing date can sometimes be delayed days, weeks, or months.
There are a variety of reasons why a real estate closing may be postponed or in the worst-case scenario, terminated. This blog post lists the most common reasons for real estate closing delays along with recommendations on how to make sure your closing does not get postponed.
6 Reasons a Real Estate Closing Could Get Delayed
1. Setting Contract Dates That Aren’t Realistic
Unrealistic deadline agreements are among the most common causes for a real estate closing to be delayed. It’s important to understand what a realistic closing date is when you are buying or selling a house, which is what a real estate agent has in-depth expertise in.
A real estate closing, on average, takes 45 to 60 days after a purchase proposal is approved. Furthermore, the type of funding a buyer uses to acquire a property, the number of stipulations in the purchase agreement, and a variety of other factors all play a role in what date is ideal for both parties.
For example, a buyer who is securing a Federal Housing Administration mortgage needs more than 21 days for closing.
2. Appraisal Issues
Whenever buying or selling real estate, it’s important to remember that the bank appraisal is an important part of the process. When a buyer obtains a mortgage, a bank appraisal is required to determine the current value of the house. However, bank appraisals can bring up a myriad of issues such as…
- The appraisal value being lower than the purchase price. Lenders won’t be able to offer more than the appraisal value.
- Roof repairs
- Out-of-date electrical system
- Maintenance on heating and cooling system
The real estate agents representing you should follow up to make sure that the appraisal is completed, that the house was assessed at the selling price or higher, and if the appraisal revealed any necessary improvements.
Bank appraisals could force the sellers to lower the price to the appraisal value or to do last-minute repairs, which is stressful for any homeowner.
3. The Property Has Title Problems
Problems with the title is one of the main reasons a closing can be delayed or even terminated completely. A title search gives you an overview of the past property ownership through a systematic analysis of public records. If a title is cleared in the title search, then the property title does not have any issues.
However, problems arise when the title does not get cleared in the search. Common reasons behind a title not coming up clear in the search could be:
- Unpaid previous liens
- Illegal possession of the property
- Errors with the documented names
- Survey disputes
The issues found in the title search could delay the closing date until the issues are resolved. In many cases, if the issues don’t get resolved, the real estate transaction could fall through.
4. Issues Concerning Property Surveys
A real estate property survey is a drawing of the land that a house is built on. A common problem from instrument surveys comes from a dispute or encroachment on the boundary line of the property. When a neighbor’s property, like part of a fence, is invading your property or on the boundary line this is known as an encroachment. Disputes about property lines and encroachments could go on for years and lead to serious legal action.
During the closing process, the parties involved with the dispute, including the neighbor, would have to sign an affidavit that indicates that all parties understand and are consenting to the the dispute on the boundary line. Depending on the availability and compliance of the parties, it could be easy to schedule a signing or extremely difficult.
5. Closing Costs Estimations That Are Inaccurate
Usually, both the buyer and seller would be provided with an estimation of the total closing costs for a purchase. However, the estimation has not always been accurate.
Disparities in what a buyer or seller believes the closing costs should come out to are a popular reason for real estate closings to get delayed. Closing disclosures give more accurate estimations and they are now being adopted widely by buyers and sellers.
6. Additional Documents Are Required By The Lender
A mortgage lender sending you a commitment doesn’t mean that you are guaranteed to get the loan. There are times where a lender will request additional proper documentation, sometimes days before closing. Lenders tend to review credit and bank statements several times before a deal is closed. If there are any unexpected deposits or credit drops, then the lender may ask for additional documents to explain the sudden change.
Stay Consistent and Be Proactive
A real estate transaction takes a lot of time, energy, and money. Getting to the closing process is a testament in itself and a marker that you are close to finalizing the transaction. It can be incredibly frustrating for home buyers or sellers to have the closing delayed. Sometimes the closing delays are within your power to avoid and sometimes they are unavoidable. However, knowing what to expect and what issues to look out for, can make the closing process that much easier.