Many people don’t know that the closing day specified in a purchase agreement is only a target date — in other words, that’s the date that both sides are aiming to close on, but it’s not a firm, binding date.

It’s common for your closing to be delayed. While the average closing takes 30-60 days, closing is a complicated legal and financial process that requires a lot of different personnel (home inspectors, agents, lenders, title and escrow agents) to do a lot of different jobs. If just one of these parties runs into delays, the whole closing process can be thrown off schedule. That can be immensely stressful, especially if one party is dealing with the double obligations of buying a new home before selling their old one.

Let’s look at some common reasons that your closing could be delayed — and why you shouldn’t panic if you have to deal with them.

1. Deed problems

If the seller inherited the property or received it as part of a divorce settlement, they may not know that they have to draft and record a corrective deed before they can sell it.

In the case of a deceased party appearing on the deed, the present owner will need to get a new deed to remove the deceased party’s name. And if the deceased party passed recently, the property may not even be sellable yet. Although the surviving spouse or partner may automatically inherit the property, due to the right of survivorship, probate proceedings will need to be completed before it can be legally sold. 

In the case of a divorce, when both parties’ names still appear on the deed, the divorced parties will need to sign a quitclaim deed, or its equivalent, to produce a clean, accurate title.

2. Lien-related complications

Unforeseen liens are a very common problem, and if they’re discovered just before closing, they can cause serious delays. Tax liens, mechanic’s liens, and HOA liens are the most common types of liens, and they need to be resolved before closing can be completed. Alternatively, the seller could sign a lien waiver, so the buyer won’t be liable for claims that come up down the line, or the two parties can simply renegotiate the sale price to take the lien into account.

One lesser-known lien complication is that even liens that have already been paid off can cause delays. When a lien is paid off, proof of payment has to be sent to the party holding the lien, and the lienholder has to record the release of the lien for it to be scrubbed. If that hasn’t happened, you or your title agent will have to track down the lienholder and get them to sign a release. If they’ve moved, or gone out of business, this could take some time — and result in significant delays!

3. Last-minute lender requests

home lender requests

Even after the buyer gets a mortgage commitment, and the funds have been approved, the lender can still ask for last-minute clarification regarding the buyer’s finances.

Lenders typically give a buyer’s finances one last look right before closing, and if they see any irregularities, it’s not uncommon for them to hold up closing until they get an explanation. For example, if they look at a buyer’s bank accounts and see large withdrawals or deposits, they’ll want the buyer to account for them. After all, the entire mortgage approval process is about the lender determining if the buyer’s finances are stable and adequate to meet the debt obligation they’re taking on. So anything that complicates the financial picture is going to give them pause.

4. Financing snags

It’s a common assumption that a buyer who’s been pre-approved for a mortgage is a lock to secure financing. After all, they’ve been pre-approved, right?

This isn’t the case, though. Pre-approval means the lender has done some initial investigation into the buyer’s finances but hasn’t done the full underwriting process. It’s not uncommon for lenders to discover concerns or irregularities once they do their deep dive into a buyer’s financials — and that’s sure to delay a closing. If a buyer has undergone serious life changes since they got their pre-approval — for example, if they’ve lost their job — that’s going to make the mortgage approval process a lot dicier.

Another possible snag here is that the recent fluctuations in mortgage rates could make some pre-approvals less solid than they appear. If rates have risen since the pre-approval letter was issued, the buyer’s purchasing power has declined, and that could lead to complications during closing. If you have any doubts about your financing, ask your lender! And if you’re a first-time buyer who’s having affordability troubles, make sure you look into grant programs that can help you buy a home.

5. A low appraisal

Lenders order a home appraisal to make sure the property being bought is actually worth the amount of the loan they’re giving the buyer. So if the home appraisal comes in lower than the sale price, the lender could balk.

So what happens in these situations? Well, the buyer and seller can renegotiate the sale price so it’s more in line with the appraised value. But more commonly, especially in a hot seller’s market like today’s, the buyer will need to cover the “appraisal gap” — the difference between the sale price and the appraised value — out of their pocket.

6. The home inspection uncovers flaws

home inspection uncovered

If the appraisal’s purpose is to reassure the lender that the home is accurately valued, the inspection’s purpose is to reassure the buyer that the home doesn’t have hidden problems. So what if the inspection does uncover problems?

This isn’t an uncommon occurrence. If an inspection uncovers, say, mold, a leaky roof, or cracks in the foundation, there are typically two ways to handle this one. One, the parties could renegotiate the price to take needed repairs into account. Sometimes, especially if the negotiations involve a lot of back-and-forths, this can lead to delays.

The second way to handle it is for the buyer to ask the seller to have the repairs done before the sale goes through. This can cause serious closing delays, especially if the repairs are complicated — which leads us to the next reason your closing could be delayed.

7. Unfinished or unsatisfactory repairs

Let’s say you had an inspection done and it uncovered problems. You negotiated with the seller to have the problems fixed before the sale closes. Contractors are hired, time passes, and it’s time for the final walkthrough. However, during the walkthrough, you find that some of the agreed-upon repairs haven’t been completed.

This isn’t an uncommon occurrence. It’s usually due to a simple oversight on the part of the seller, and not any malice or intransigence — but it’ll still lead to delays while the work is done. If you can’t find a contractor to come out right away, the closing will be delayed while you wait for the repairs to be completed. 

8. New problems

Let’s say you complete the final walkthrough, and find that all the requested repairs have been done. But you might discover new problems — maybe a recent storm has caused the roof to spring a leak, or the HVAC system has broken down. These problems will have to be fixed before the sale can go through, and once again, you may be left waiting for contractor availability. Since the final walkthrough is usually scheduled very close to closing, this will almost certainly lead to delays!

8 reasons your closing could be delayed was last modified: September 16th, 2022 by Ben Mizes
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