The housing market in many parts around the country are on fire at a time when people are adjusting to create a new normal that works for our new today. You have spent weeks, or perhaps even months, finding the perfect house to call home. It is now time to start moving in, or is it? There is still one minor detail, closing on a house (aka “the closing”) must be completed before you sign the papers and accept your keys. This is when you will be glad to have a savvy real estate professional working on your side while navigating this path that is filled with numerous factors that can slow, or even kill the deal.
So, how long will this process take to complete? The short answer is a month (or so) since it is possible to accomplish this task within about 30 days, but most professionals suggest that you plan for the closing to take closer to 45 days. “We need at least 30 days [for the closing to be completed] on a cash offer, but we could anticipate up to 90 days when using financing,” said Jeffrey Morgan of LIV Sotheby’s International Realty in Colorado.
Let’s take a detailed look at the progression from start to finish so you know what to expect, and what to avoid…
Closing on a House: The Process from Start to Finish
You will begin by opening an escrow account, which will hold all monies involved with the sale. The next step is to obtain the home and pest inspections to discover issues with the property, and since these are often required by your mortgage lender. You then have the option to go back to the seller and renegotiate the price based on your findings during the inspections.
Unless you are involved with a cash purchase, plan to dedicate a lot of time completing the mortgage application, and providing the necessary documents. You will then proceed with the appraisal of the home to satisfy the mortgage lender. The hope is that the appraisal confirms the agreed upon purchase price, but if it is too low then you need to take the time to renegotiate with the seller. Be sure to seek out a reputable title agent to perform a title search so that nobody can try to claim your property; and also have the title insurance (hazard insurance) issued to further protect your investment.
By this time, you begin to see that light at the end of the tunnel come into view, but don’t get too comfortable yet, or take your eye off the prize. The escrow/title agent should let you know the tentative time and date for your closing, which is when you can begin to at least put the Champagne on ice. You will want to review all these documents with your real estate professional or real estate attorney to confirm the details and costs involved with the closing are correct. After your final walkthrough, you will proceed with the final steps of signing your name on all the paperwork and then receiving your keys.
While there are many steps to the closing process, it does not seem all that daunting when you take it step-by-step alongside your real estate professional. Delays in the closing can be a result of many things, but generally include problems with the property, financing, or when effected by your geographical location. Jeff Morgan specializes in real estate in the Colorado Mountain communities, and adds, “Appraisals have been very slow and difficult to schedule in these communities, so dates for due diligence and inspections have to be set out at least 45 to 60 days when financing.”
Closing on a House: Plan for Potential Problems and Delays
While there are always circumstances that are unavoidable, such as the sudden death of the homeowner or if you discover the home has liens against it. These types of delays are disappointing since they often add unexpected expenses and time to your closing process. You might need to renegotiate with the seller if problems are discovered during the inspections, or if the appraisal comes back substantially lower than the agreed price. Shaun Salari of the Brad Officer Group in Jacksonville, Florida said, “One of the most common issues we see today are repair negotiations between the buyer and seller after the inspections has been performed. This has a trickle down affect because these delays also push back the appraisal during these negotiations.”
You want to minimize these time delays, but they are important to confirm the quality of the purchase, and the price that you will pay. Fortunately, with the guidance of your real estate professional and/or real estate attorney, many of the problems can be fixed quickly, or completely avoided so that you can collect your keys in a timely manner. “To further limit the amount of delays, I remind buyers that renegotiations should be reserved for larger items such as the roof, electrical, plumbing, HVAC and foundation; and don’t delay the closing for minor cosmetic issues that can be fixed once they own the home,” added Salari.
As soon as your offer has been accepted, you should work with your real estate professional to create a schedule for your closing so that you can have your documents and scheduled inspections completed correctly, and quickly. Many buyers today have become more efficient by being pre-approved, which is not always a guarantee, but it does often avoid many of the possible financing issues. You might be excited about the idea of buying new furniture for the new home, but experts encourage you to resist the urge to spend money or open new accounts until you own the home, as these can have a negative effect to your credit score. Plan ahead and make intelligent decisions is a great place to begin.
Financing can be a major issue during the closing process, but you hope to avoid this by taking the time to understand your credit score, getting pre-approved, and then having all your paperwork organized and prepared. Financial delays can occur on your side as the buyer, but also via the seller if he/she needs to delay the closing because they need more time. The paperwork is extensive when buying a home, but as long as you are careful to read everything before you sign your name, and also have it all reviewed by your real estate professional and/or real estate attorney, then you will be signing that final page, opening the door to your new home and popping the Champagne to celebrate a successful closing in no time at all.
Congratulations on the purchase of your new home!