When Buyer Closing Goes Wrong
Real estate transactions can close in as little as a half hour, although most take longer. Some closings take hours, even days, longer than planned. It's a little like getting out a map and estimating cross-state driving time without knowing about a major construction project that has tied up traffic for miles.
Like the driver who asks about potential delays, the buyer who spends time researching potential problems in advance is the buyer most likely to reach the destination on time. Just remember that real life interferes with even the best-laid plans. There is no guarantee you will close on time.
Some of the delays in closing could be errors in documents, money arriving late or in the wrong amount and discoveries made during the buyer's final walk-through.
Here are some common problems and solutions:
Problem: Errors in documents
Document problems can be as simple as a name misspelled or a transposed number in an address, or as serious as incorrect loan amounts or missing pages. All of these glitches can cause delays of hours or even days because everything has to be in order before closing.
Solution: Communicate and review
Ask to see every piece of paperwork as far in advance as you can. Pay particular attention to loan documents. Double-check loan and down payment amounts, interest rates, spellings and all personal information. Question anything you don't understand or that seems odd.
Problem: Money, money, money
You could have guessed that a number of potential problems have to do with money. Here's what happens:
You go to the bank the day before closing and arrange to have your down payment transferred directly to the closing agent. Sounds simple. But your transaction falls through some inexplicable crack at the bank, and either the money doesn't arrive by your appointment time, or it arrives short of the amount you need.
If it arrives short, you have the option of making up the difference, but personal checks are not accepted, so you'll have to go somewhere to buy a certified or cashier's check. Your closing is probably going to be rescheduled.
There are two ways to avoid this problem. One is for you to bring the down payment to closing yourself in the form of a certified or cashier's check. The other is to arrange the wire or bank transfer of funds so it reaches the closing agent a couple of days early. If you don't yet know the exact amount needed at closing, have more than enough money transferred. You'll get a refund later.
Problem: Where are the loan documents?
Let's say your loan package is being delivered to the closing agent by overnight express service. You arrive for the closing appointment to find that "pony express" is a better description. Is it lost? Misplaced? Will it arrive an hour from now? All you and the seller know is that closing has come to a screeching halt.
Solution: Your closing agent as best pal
Talk to your closing agent well ahead of your appointment - at least a few days. If you are working through a mortgage broker, they are often more than eager to assist you and your agent in expediting paperwork and guaranteeing its completion and arrival to the closing appointment. But you can assist in this process! Ask if everyone on all ends has everything they need. Between bank statements, tax returns and other documents, there are ample opportunities for items to go missing. On the morning of closing, if your agent and or lender is not in charge of corralling all parties and documents, you can make a call to verify that the file for your transaction is complete, and the documents are ready to sign.
Problem: It's a cloudy day in title land
Let's say the title company discovers that the seller never paid the contractor for the backyard fence, so there is a lien on the property, or that her estranged brother filed a suit claiming mom and dad left the house to him. The bottom line is that you, the buyer, have a problem. You need to insist on a clear, unclouded, problem-free title before closing. Your lender will insist on it, too.
Solution: Do your homework
You've heard it before and now again. Advance homework is your best defense against last-minute title surprises. You need to study the preliminary title report completed shortly after escrow opened. In fact, you need to read it as soon as you can get a copy. Often, the report goes directly to the lender. Arrange to receive your own copy.
At closing you'll buy title insurance to protect yourself in case the title company missed anything in its search, but that policy is only effective from the day of closing forward.
Problem: Last-minute requests
Lenders are cited by the experts as sometimes asking for more information at the last minute - copies of a rental agreement, a canceled deposit check, the original hazard insurance payment. Last-minute requests make for delays at closing.
Solution: Stay in touch
Talk to your loan officer in advance. Is there anything else you can supply to complete the file? Another idea is to bring every piece of paper you can think of to closing.
Problem: Oh, dear - discoveries during the final walk-through
You are one day from closing, and during the final walk-through in what is almost your home you find that the seller left piles of trash in every room, ripped the basin off the bathroom wall and gouged a fist-sized hole in the family room wall when removing the television set.
Solution: Jump on it right now
Your agent should work with the seller's agent to solve the problems. First of all, figure out what's acceptable, how much it might cost and how to make the seller pay. One way would be to negotiate a credit on your closing fees, meaning the seller pays more at closing. Another would be to have the appropriate amount from the seller's proceeds placed in escrow until the problems are fixed.
The point is, don't wait until closing to bring up any issues. Get them resolved beforehand. If you can't, postpone the closing while you work it out.
- Both buyer and seller must agree to any changes in the closing instructions. Amendments describing changes must be written up, signed by both parties and attached to the instructions.
- Review every document before signing your name. Once you sign, you've agreed.
- Avoid unnecessary delays. Your lender's loan commitment has an expiration date, as does the day by which the escrow must be closed.
- One of the very best things you can do is make sure you, and everyone else involved in closing, arrives on time. (Your spouse/partner needs to be there, too!)
- If a sale fails to close, the fate of the buyer's earnest money is dictated by the wording of the sales contract or the reasons for the failure. You may need to consult an attorney.
- Double-check information on the final settlement statement that the closing agent will mail to you after the deal is done. It's an important document. You want it right.