I pride myself on smooth, on-time closings for my clients but this week seems to be a ‘pride goes before a fall’ kind of week for me. Of the seven closings I have scheduled for this week, five of them were delayed, rushed, or cancelled because of repairs.
So why is this happening? And how can we prevent it?Sometimes, a buyer knows they want something fixed on the house from the very beginning so they write this into the purchase agreement. I love it when buyers do this. It lets all parties know at the very beginning of the process exactly what is wanted so they can plan accordingly.
The problems come up when the repair is delayed. Sellers will often wait on doing them until they know that all other open issues related to the purchase are done. Understandably, they don’t want to pay for repairs only to then find out that the appraisal came back low, the loan got declined or the septic failed.
Why is this a problem?If a buyer writes a repair into the purchase agreement, the lender sees it as a condition of the sale so it also becomes a condition of the loan approval. Most lenders need to have all open conditions in hand at least a week before closing to finish out the final steps. That means the repair needs to be done and verified as done by the appraiser 7+ days before the closing.
How can we keep this from delaying the closing?To keep this from delaying your loan, put a timeline for the seller in the purchase agreement. Don’t just say “deck to be stained” say “deck to stained by June 27th”, leaving enough time for the appraiser to verify that it’s done and get their report back to the lender at least a week before closing.
Another option is to write up an addendum and remove the condition from the purchase agreement once the buyer feels that the work has been properly done. I like this option better because it doesn’t require an appraiser to go back out which is an added cost and time delay. The bank will still need that 7+ days to finish the approval and close smoothly, but they won’t need the 3-4 days on top of that to have the appraiser go back out.
What if the repair came up mid-contract?Sometimes all parties don’t know about the repair upfront. They become aware that it’s needed when the home inspection or appraisal come back.
When the repair came up as a part of the home inspection, this typically won’t delay the loan process because the bank is not normally involved in that piece. Some lenders do require copies of inspections, but not most, so these repairs can be done right up to closing if needed.The Realtor still needs to allow extra time, though. We’re in a busy season and trades people are backed up. The work done is also not always up to the buyer’s expectations. If the Realtor is thinking the work can be finished the morning of closing and things will go smoothly, their risking a closing nightmare and a very unhappy client.
When the repair comes up because of the appraisal, we’re back to the “7+ Days” thing. That means either the seller needs to get the repair done fast, an extension needs done or – sometimes – both.