Buying a home can be one of the most significant moments of your life. Your home will be the single most expensive investment you ever make, by far. But once closing is scheduled, that’s it, right? The stomach-in-your-throat feeling should go away and all is smooth sailing.
Well, not always. There are many reasons closings may get delayed. Don’t let this list get you down, but it’s good to know what could possibly happen. Try to remember that sometimes delayed closings do actually happen.
Repairs Were Delayed
In this age of short labor and uncertain supply chains, repair delays are inevitable. It happens in ideal times, too. Maybe it happens because a part didn’t come in for that water heater that was on your repair sheet, or there was no one available to fix the siding where someone’s grill got a little overly excited and left a mark.
Sometimes you have no choice but to wait to close, especially if you’re using a loan type that requires the requested repairs be made prior to closing. But, in other cases, your real estate agent can create an addendum to your contract that allows the closing company to hold the cost of repairs in an escrow account for you, so that they are made on your behalf once the labor and materials are available.
Financing Issues
Many home buyers, especially first-timers, don’t realize that their financial information will be verified again prior to closing. It has to match, more or less, what it was when you applied. So, same job, same amount of money in the bank, same amount of debt (or less, less is OK), same everything. Usually that’s possible within the narrow window between loan approval and closing.
Unfortunately, sometimes things go wrong, and that second verification reveals a new credit line that’s been opened (for new house stuff, of course), or a change in employment, or some other problem. In these cases, closing will be delayed until those issues can be resolved. Moral of the story? Don’t do anything financially interesting between approval and closing, and all will be well.
Appraisal Was Too Low
In the current real estate atmosphere, with prices changing radically in some markets, it’s not unusual to hear of a closing that’s been delayed due to an issue with the appraisal. Of course, the issue isn’t with the appraisal so much as it is with the fact that the market data has outpaced appraisal data. Here in Naples, that's been a problem for the last couple of years. As prices skyrocket, data from previous sales no longer supports the seller’s asking price for their home. A too-low appraisal can delay closing, since sometimes a second appraisal will be needed to verify that there were no errors in the first appraisal, or the seller and buyer will have to go back to the table and renegotiate the terms of the contract.
If you have to renegotiate your contract, it’s likely going to be due to your bank’s unwillingness to loan more than the house will appraise for at that moment. In that case, the contract will need to be reduced to the appraisal price. Sometimes this is possible, sometimes it’s not if the seller owes a fair amount on their house or needs the difference to make their next purchase. If you and the seller can't renegotiate the price down - not a common occurrence in our current seller's market - then perhaps you can make up the difference between the approved loan amount and the purchase price with cash. There’s not a lot you can do if you can’t come to terms, but most of the time, your real estate agent and closing agents will find a way.
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