How to Avoid Closing Delays with Your Lender
By: Loretta Tsiskakis, Esq.
There are many reasons why a real estate closing can be delayed or cancelled when the transaction involves institutional financing. If you are considering obtaining financing to purchase real estate, it is important to keep in mind common delays that occur with lenders in order to increase your chances of avoiding these delays and closing as scheduled.
Most delays in a financed purchase are caused by the buyer’s failure to submit all requested documents in a timely and accurate manner to the lender. The standard contracts provide five days from the Effective Date to make a loan application. Failure to do so could “burn” the buyer’s protection under the finance contingency.
The process does not stop with the loan application. Lenders will continually ask borrowers for additional or updated financial information as the loan process continues. Responding swiftly and completely will help to avoid delays in the loan closing process.
Remember, lenders will continue to monitor your credit during the loan process. This is not the time to satisfy a desire to buy a new sports car or an expensive yacht. It is important for the buyer obtaining financing to keep their finances stable during the loan application process. Buying a car or even opening new lines of credit will affect one’s credit rating and may delay the loan process or ultimately result in the denial of the loan.
In 2014, the Consumer Financial Protection Bureau implemented new lending guidelines. These new rules have caused delays in loan closings. Luckily, most residential purchase agreements allow for a 10 day automatic extension of the closing date for delays caused by the new rules.
Unfortunately, Realtors and appraisers don’t always agree. Low appraisals may require the buyer and seller to renegotiate the sales price, or otherwise kill the deal.
Not all delays in loan closings are a direct result of financing. Sometimes delays are caused because a seller fails to repair defects to the property discovered by an inspection. Remember, a lender has an interest in the condition of the property because it is the collateral for the loan.
Accordingly, if repairs are not made, the lender may delay the closing. In addition, most lenders do not allow credits in lieu of repairs. Be sure all parties are communicating concerning these types of issues so you are prepared for a lender’s response.
Communication is the best way to avoid delays with the lender, which could result in a delayed closing, the buyer losing their interest rate lock or their deposit or possibly their home.
WWM&R associate, Loretta Tsiskakis, Esq., focuses her practice in the areas of commercial and residential real estate law, foreclosures, commercial lending law, corporate formation and representation, and title insurance services.