Did you know that “closing” or settlement is listed as one of the top ten problem areas that occurs in a real estate sale? According to recent Realtors® Confidence Index surveys conducted by the National Association of Realtors®, between 10
percent and 14 percent of pending transactions don’t close, and another 20 percent are delayed but eventually close. These issues with closing can include errors in documents, money arriving late or in the wrong amount, or discoveries made during the buyer’s final walk-through. Whatever the case, it’s important that you’re prepared for whatever complications may arise. Read on for a list of common closing problems and their solutions.
1. Problem: Errors in documents.
There are a number of issues that can occur with closing documents.These can be simple mistakes, such as a misspelled name or a transposed number in an address, or can be as serious as incorrect loan amounts or missing pages. Regardless of the issue’s severity these errors can cause major setbacks of hours or even days, for all of the closing documents must be in order for a sale to be made.
Solution: Effective communication and review processes.
Before closing you should request to see every piece of paperwork as far in advance as you can. You should pay special attention to loan documents, specifically down payment amounts, interest rates, spellings and all personal information. If something unusual sticks out to you or if you misunderstand any of the information in these documents, it’s best to meet with your client as soon as possible.
2. Problem: A home inspection uncovers serious issues.
Occasionally, a final walk-through will reveal serious issues with a property. Most lenders will require you to perform inspections on the house to detect problems such as pest infestations or structural problems, such as damage to the foundation and electrical problems. If either of these inspections reveal major problems, it can delay the closing while you negotiate with the seller to remedy the issues.
Solution: Look into possible repairs before buyer’s inspection.
You should work with the seller’s agent to resolve any issues with the exterior or interior of the property. First, you need to decide what is acceptable, how much it may cost and how to make the seller pay for the damage. One way to do this would be to to negotiate a credit on your closing fees, meaning the seller pays more at closing. Another option would be to have the appropriate amount from the seller’s proceeds placed in escrow until the damage is fixed. Whatever you decide, it’s integral you don’t wait until the day of the closing to deal with these issues
3. Problem: Financing falls through at the last minute.
There are a number of issues that can arise involving money. These problems can include transactions that have fallen through, which can result in money that doesn’t arrive by the appointed time or arrives short of the amount that is needed. The bank could also refuse to pay for a portion or all of the purchase price of a property. If you run into any of these setbacks, it’s likely the closing will need to be rescheduled.
Solution: Help buyers get their documentation in order.
There are a number of ways you can avoid these issues. To avoid late or short payments, encourage your client to bring the down payment to closing in the form of a certified or cashier’s check, or arrange the wire or bank transfer of funds so it reaches the closing agent a couple of days early. If the bank refuses to pay for a portion of the purchase price of a property, see if you can get a second opinion from a qualified appraiser. Plus, you should double-check the mortgage application prior to closing. If there are any problems, discuss ways to resolve them with your client.
For more information on mistakes to avoid in real estate, enroll in our course, Common Mistakes Every Agent Should Avoid.
