We’ve seen it time and again, the real estate closing is delayed. It’s important to understand that delays can happen for a myriad of reasons. Everyone is working toward the closing date in the contract, but many things can delay the process.

We have a saying in real estate: “The Lender drives the bus.” In Indiana, every purchase agreement that includes a mortgage has a “Financial Contingency.” This contingency is only lifted once the lender gives the Clear to Close or final loan approval.

Until then, you can’t close. Lots of delayed closings are tied to the lender but not necessarily his/her fault.

#1 Ordering/Receiving the Appraisal

For instance, the appraisal. The lender orders the appraisal but then has to wait for an appraiser to accept the order, complete the physical appraisal, write the report, turn it into the Appraisal Management Company (if one is used), and then, it’s turned over to the lender.

Once the lender receives it, the underwriter will check it over. He/She will give approval or send it back for revisions.

The process can last 2+ weeks. That’s over half the typical 30 day pending period. This is part of the reason the Indiana Association of Realtors Purchase Agreement now has verbiage saying the lender will order the appraisal right away.

#2 Underwriting Conditions

A loan file is typically submitted to the underwriter 2 to 3 times during the loan process. If the file comes back with conditions, these have to be taken care of before the file is reviewed again.

Sometimes Buyer’s Agents and/or buyers are not quick in getting the underwriter what is needed to clear the conditions. For example, the underwriter may request additional documents like tax transcripts, gift letters or explanation letters for large deposits or items on a credit report.

It could be any number of things. This can definitely slow down the clear to close approval. The buyer has to gather the documents and give them to their loan officer/processor. They include the documents in the file and re-submit for review. In the meantime, there may have been quite a few other files get in line ahead of this file. And the waiting begins…

#3 Inspection Issues

Not uncommon are inspection issues. During the inspection period, the buyer and seller negotiate repairs to the home. This can take some time if the buyer and/or seller need to get contractor quotes in order to make an informed response or counter response during this time.

Likewise, once agreed to, the repairs typically need to take place prior to closing. If the sellers are having a hard time finding or getting the contractors out to the home, this can cause a closing delay as well!

#4 Title Issues

Another closing delay problem can occur when the title search is completed. The title company searches the property’s history to see what, if any mortgages, liens, unpaid taxes, encroachments, easements, etc… are associated with the property.

A common problem is that a lien is placed on the property that the seller doesn’t know about. The problem can typically be fixed by paying off the lien at closing before giving the seller their proceeds. However, it can still slow the pending process down.

One thing we have seen a few times recently is the sellers have not retired the BMV title of a manufactured home. When a manufactured home is placed on a foundation and has become permanent, it should be transitioned to “real estate.” It’s a pretty simple process but can take time if the state BMV is backed up. We’ve seen it take one day all the way up to 30+ days.

This is typically a lender requirement for most all mortgage loans on manufactured housing.

#5 Low Appraisal

Another appraisal problem is when the appraised value of the home is lower than the agreed upon purchase price. Everything comes to a halt until a resolution is agreed to.

Lenders will not loan more than the appraised value on a property. This means the buyers and sellers have to negotiate, again.

In Conclusion

While there are lots of other reasons a closing is delayed, these are the 5 we see most often in Central Indiana.

Remember, nothing is set in stone until the lender gives the Clear to Close. The closing date on the contract is a target all parties work towards. When you hit it, fantastic! But, don’t be upset if you don’t.

The key is to be sure you have a great real estate agent (and lender if you are the buyer.) They need to stay on top of the situation and deal with anything that arises in a timely manner so closing can happen as close to the target date as possible!