Some surprises are great. An unexpected bonus or a hotel upgrade can make your day. But when it comes to closing on a home, a surprise is almost never a good thing.
Paperwork tedium will give way to terror if there’s an unexpected delay in financing or error in a title document. But you can avoid closing problems and delays, or at lease minimize them, by understanding what might go wrong and monitoring it well ahead of your closing date.
What happens at closing is the culmination of more than a month of gathering and preparing documents. For closing to go off without a glitch, your closing officer, your lender or loan officer and your real estate agent have to work together to get everything in order and processed correctly. These folks are professionals and they absolutely should know what they are doing. But they are also human beings working on a lot of files, not just yours.
If your closing gets pushed back a day, that just means they do it on Tuesday instead of Monday. It really isn’t an emergency in their world. You, however, have a moving truck scheduled and deadline to vacate your current home. Your loan commitment has an expiration date and so does your escrow. All of this means it’s more critical to you than it is to anyone else to get the deal completed on time, so it’s wise for you to stay on top of things.
With that in mind, here are a few common closing problems as well as ways to prevent them.
One of the most common closing problems is an error in documents. It could be as simple as a misspelled name or transposed address number or as serious as an incorrect loan amount or missing pages. Either way, it could cause a delay of hours or even days.
Prevention: Preview everything
Go ahead and ask to see every piece of paperwork as far in advance as possible. Pay special attention to loan documents. By law, you will get your Loan Estimate and Closing Disclosure forms three days before closing. Look at them carefully and immediately. The sooner you spot a problem the faster you can get it fixed and keep your closing on track. If something seems odd or you just don’t understand it, this is the time to ask questions. Double-check the loan and down payment amounts, interest rates, spellings and all personal information.
When you set a closing date and communicate that with your lender, you probably assume they will let you know in plenty of time if there are problems with meeting that deadline. You would be wrong. Understand that in a hot real estate buying or refinancing market, lenders can be inundated. Without periodic calls from you and your real estate agent, who also has a vested interest in closing the deal on time, your file could easily fall to the bottom of the pile while the loan officer deals with more urgent loans. By the time your loan is at the top of the priority list, it might be too late to get that missing document in time. Lenders sometimes ask for more information at the last minute – copies of a rental agreement, a canceled deposit check, the original hazard insurance payment – that can leave you scrambling and lead to closing delays.
Prevention: Check in with everyone
Early on, find out exactly what documents the lender needs to complete your file and write you loan. Between bank statements, tax returns and other documents, there are ample opportunities for items to go missing or be forgotten about until the last minute. Once you know what they need to write your loan, call or email periodically to make sure they have everything. (Your real estate agent may also be doing this so check with them as well.) How often? That depends on how much is missing from your file. But a weekly check-in isn’t out of hand until they confirm your file is complete. If there are problems or several missing documents, check in more often. Always make sure they are aware of your anticipated closing date.
Several days before closing, check in with your closing agent to make sure they are in communication with your lender and that they have everything they need. If there is something you think they might possibly need but no one has mentioned it, bring it to the closing meeting.
You go to the bank the day before closing and arrange to have your down payment transferred directly to the closing agent. You’re good to go. Unless the transfer falls through due to some bug in the bank’s system and the money either doesn’t get there in time or what comes through is less than the amount you need.
Prevention: Bring it
You can avoid this issue entirely by bringing your down payment in the form of a certified or cashier’s check. (You can’t use a personal check, so don’t even try that.) Or, simply arrange the wire or bank transfer of funds so it reaches the closing agent a couple of days early. If you don’t yet know the exact amount needed at closing, have more than enough money transferred. You’ll get a refund later.
Maybe the title company discovers that the seller never paid the contractor for the backyard fence or hasn’t paid property taxes for five years and there is a lien on the property. Or perhaps the home is the subject of a lawsuit between bickering relatives. Interesting as that may be, the bottom line is that you, the buyer, have a problem. You need to insist on a clear, unclouded, problem-free title before closing. Your lender will insist on it, too.
Prevention: Read the title report
Shortly after escrow opened, the title company completed a preliminary title report. That often goes directly to your lender, but you can get a copy either from the title company or your lender. Get it as soon as possible and read it carefully. At closing you’ll buy title insurance to protect yourself in case the title company missed anything in its search, but that policy is only effective from the day of closing forward.
It’s the day before closing and you’re doing a final walk-through of what is almost your home. The seller has punched a hole in the wall and ripped down the fixtures they were supposed to leave.
Prevention: Jump on it right now
Your agent should work with the seller’s agent to solve the problems. First, figure out what’s acceptable, how much it might cost and how to make the seller pay. One way would be to negotiate a credit on your closing fees, meaning the seller pays more at closing. Another would be to have the appropriate amount from the seller’s proceeds placed in escrow until the problems are fixed.
The point is, don’t wait until closing to bring up any issues. Get them resolved beforehand. If you can’t, you’ll have to postpone the closing while you work it out. In some cases, you may prefer to just accept responsibility for the problems rather than delay closing, but that’s up to you.