The closing is the last step in the long, sometimes difficult, almost always anxious journey in buying and selling a house. And it can be just as ripe for pitfalls as any other part of the process.
According to a poll of 50,000 agents and brokers by the National Association of Realtors, only 6% of settlements go off without some kind of hitch.
Any number of things can go wrong, from being forced to sit on your hands while documentation errors are corrected to the would-be buyer going MIA. The latter incident is all too common, according to realty agents on industry site ActiveRain.com. Sometimes, when buyers get cold feet, they just outright disappear.
If your long-lost buyer has an agent, that person should be able to locate their client to determine what's wrong. Otherwise, a call to your attorney is in order.
At the very least, you should be able to pocket the buyer's earnest money: the dough they put up when they made their initial offer to buy your place. Earnest money is intended to compensate you for the time your place has been off the market if the deal does not close.
So why would a buyer bail? Sometimes their circumstances change -- they switched jobs after the contract was signed, perhaps, or they bought a new vehicle or a house full of furniture. Changes like this can mean a buyer no longer meets their lender's all-important debt-to-income ratio -- and thus no longer qualifies for financing. According to NAR's survey, this is far and away the most common reason for delayed closings.
Buyers should be advised by their agents not to do anything that changes their financial picture or credit score before closing. But if they do, the only thing a seller can do is put the house back on the market -- or wait for the buyer to requalify. In one case, a Nashville seller waited 45 days until the buyer's first paycheck from their new job arrived, putting the deal back on.
It's another story if the buyer -- or seller -- simply changes their mind. Maybe the seller decides not to give up the old homestead where their kids were born and raised. Or perhaps the buyer realizes they bit off more than they could chew, and can't really afford the monthly payments.
In cases like this, one party can sue the other for specific performance, thereby forcing the balky buyer or seller to carry through on the contract. If you are the seller, you can keep the earnest money. Or both of you can simply move on.
More often, though, the issue is a mistake in the paperwork. Luke Babich of Clever Real Estate in St. Louis says paperwork errors are "hands down" one of the most common causes of closing delays. "Even something as small as a misspelled name or transposed house number can render a document invalid," he says.
When even the slightest miscue is discovered, everything grinds to a halt until corrections are made and new documents are produced. That could just take a few minutes, or it could be days.
That's why both parties should review the closing documents in advance. Hey, you're supposed to get them three days prior to settlement anyway, so why not take a good, hard look at them? Then you can fix anything that needs fixing before it becomes a major headache.
Delays also can be caused by title issues such as unpaid property taxes, obscure lawsuits, numerous types of liens on the property, or even forgeries like the fake signature of a long-divorced spouse. Approximately 1 in 8 agents in the NAR survey encountered title and deed issues at settlement, and title companies report that more than a third of all contracts require "extraordinary work" to clean up the title.
Babich reminds buyers that they can -- and should -- purchase insurance to protect against flaws that title searches may have missed. "But it doesn't work retroactively," he said, so title issues must be addressed before the current sale can be closed.
Here, sellers might want to look for the title policy they purchased when they bought the house to see if that company overlooked the same issue. Otherwise, there is little anyone can do but cancel the deal, or sit tight until the problems are resolved.
Closing delays can also be caused by latent dissatisfaction with the contract. This problem usually stems from one party's bitterness with the initial negotiation process, and can show up in all sorts of ways: Perhaps the buyer says they're dissatisfied with how the repairs were made, or maybe the seller says that if the buyer won't pay all the closing costs, the deal's off.
Whatever the reason closing is held up, it's best to take a deep breath and let the situation play out. Patience is a virtue. If you keep your cool, your sale is likely to close -- whatever the delay you encounter.