As usual I try to concentrate on what is going on in our Real Real Estate world and there have been plenty of challenges to think and write about. I have found however if you are proactive it may lessen the sting for you and your customers. A new trend or new challenge for all of us has been the dreaded closing delay. Delays have become the norm rather than the exception so I thought it would be good to go over some of the causes so our customers can be forewarned and be ready.
Having a contract is a GREAT thing for all of us but as the old song says,”We have only just begun…”
According to the National Association of Realtors between 10 and 14 percent of pending transactions don’t close. Another 20 percent are delayed and that statistic is rising!!!!
One of our biggest defenses is letting our customers know up front that there may be delays and to be prepared for them so they are not taken aback at the last hour!!! The area of loan approval and qualifications is a big area that has been causing the delay of close.
Buyers need to be aware that qualifications are tricky these days and even getting a pre-qualification letter does not mean the buyer will be approved for the loan. Many banks are no longer issueing pre-approval letters. Verifying income and assets up front is vital in knowing the financial health of the buyer. New requirements under the Real Estate Settlement and Procedures Act have brought changes to the way banks are able to qualify buyers.
Talking face to face to a lender is much preferable than relying on an on- line approval. Tighter lending standards and concern about mortgage fraud has created more mortgage work and underwriting guidelines that further delay the closing process. A good example are the changes in gift letter documentation. FHA buyers who receive funds from a family member have to disclose the gift and its source, furthermore the giver has to disclose its source as well. Lenders say it is easy to overlook this later requirement and you CAN NOT get the loan without it.
New condominiums pose challenges as well because the FHA requires that 50% of the developments units must be under contract before the agency will approve financing for individual condos. Lenders are also asking to see statements of homeowners association reserves before approving a loan, which can create difficulty at the last minute if the HOA is not cooperative. This has been a special dihlema in foreclosures as many times the bank has cleared the issue only to have miss communication and question of title that has to go through many channels to be cleared. This is one of the reasons that Foreclosure closings are taking an average of 45 days or more rather than the quick close they used to be.
Business is good and buyers are still excited as ever about the great deals to be had, but knowing there may be a few hurdles to jump in advance may help complete the deal. Next week we will address some other issues but wanted to get you started with some good information. As usual, it is my great joy to communicate and share about this industry that I love so much. Until next time please remember; “The only people we need to get even with are those that have helped us” and my list is long!!!!
grateful Realtor of Beachy Beach
Karen K. Smith
“The only people we have to get even with are those that have helped us”