It’s been a week of delays made worse by a bad bout of vertigo I suffered mid-week (If the room is going to spin, tall glasses of champagne should be the cause – that wasn't the case).
Despite everyone’s best intentions, the Lenders are struggling to meet the quick time frames they’ve promised on two of my closings. Typically, it's more documentation that's required by the Underwriter. Sometimes it's a missing signature or two, and once in awhile, it's to trace the source of funds. Whatever the reason, no one likes delays. (In the words of Jerry McGuire: “Show me the money!”)
Still, there’s no cause for panic; I'm certain all will be resolved before the fireworks begin. This is when, as Buyers or Sellers, you need to remain flexible and open to the process. In both cases, the hold-ups are based on legal technicalities and time frames that are mandated by law; not because of an intentional act. In short, a 3-day waiting period is a 3-day waiting period and as no one is acting in bad faith, we move forward with good will. (Why court an adversarial closing?)
What’s it look like in the background? To be frank, it's a scramble. Right now, I’m writing a closing extension for my Buyers and speaking with the Lender on another. Meanwhile the Underwriters are diligently working to get the required CD (Closing Disclosure) to the Buyers and after a 72-hour waiting period, loan docs go to title as fast as they can. Once there, the Escrow Officer must prepare them, following a long list of instructions, and will then meet with the Buyers and the Sellers for signatures. THEN, the loan docs are sent back to the Lender who forwards them on to the Underwriter, who reviews the file one last time before funding the loan. Oh, and BTW, the Lender will wait for the Buyers' funds to arrive before wiring the necessary funds to make up the difference. (Got all that?) Finally, the new deed is recorded with the county and the transfer of ownership is complete!
In other words, there are a LOT of moving parts to constructing a loan and successfully closing escrow. Add in the Buyers, the Sellers, the Agents, the Mortgage Broker, the Underwriter, the Title Officer, the Bankers, and the Recorder, and you can begin to see how many points of contact a typical transaction passes through before everything is said and done. (And you thought finding the house was the hard part.)
In fact, it’s all hard. Made harder by the go-go-GO (!!!) of our highly competitive marketplace which basically requires Buyers to write high and give away their due diligence, and prompts Lenders and Agents to promise extraordinary short closing periods to compete with all-cash offers and other aggressive Buyers. (“Show me the money!”) That we tend to meet our deadlines more often than we miss them is fairly astonishing, given the number of litmus tests a deal must pass through before it's finally – or should I say, quickly - consummated. If you thought Realtors aren't earning their commission, think again.
Let’s back up just a minute and begin at the starting point which is when starry-eyed Buyers call and say they’d like to jump into the marketplace. Nine times out of ten, they haven’t yet been pre-approved. Cut to: a conversation with a Mortgage Broker, credit checks, debt-to-income-ratios, W-2s, tax documents, and a pre-approval process that’s designed to establish credit worthiness so that once these Buyers find the home of their dreams, we can write a winning offer that's guaranteed to be funded. That’s Step 1 and it’s just the beginning . . .
Step 2: Establishing a budget, understanding the carrying cost beyond the monthly mortgage (aka: PITI - principal, interest, taxes and insurance) and setting aside funds for closing costs, as well as a good-faith deposit.
Step 3: Getting to know the marketplace, visiting Sunday Opens regularly, following the sales prices on homes you’ve loved, narrowing the focus and communicating often with your REALTOR; meeting them whenever necessary to pursue selected properties.
Step 4: Writing an aggressive offer, pre-inspecting, strengthening the price and terms within the body of the contract, and fully understanding the risks of an overbid. (Should the appraisal fall short, there could be a significant delta and that falls on the BUYER to absorb.)
Step 5: Opening escrow, meeting the deadlines, waiving any contingencies, shopping for home owner's insurance and signing the lender CD (Closing Disclosure) to start the 72-hour waiting period.
Step 6: Meeting with the Title Officer, establishing how to hold title, and signing loan docs.
Step 7: Wiring your down payment into the escrow account and waiting on the bank to wire in the remainder. (“Show me the money!”)
Step 8: Recording; this is when the deed officially passes from the Seller to the Buyer and is recorded with the county in which the home resides.
Step 9: Transferring utilities into your name, changing your mailing address, packing and loading up the moving van.
Step 10: Champagne! (Pop the cork,you’ve earned it.)
Along the way, your Realtor should be sharing every anxious, painful, worried, happy, joyful step of the journey with you, but as illustrated here, there’s far more to manage than meets the eye – and that’s just on the buy side. On the sell side, we have essentially become project managers, stage directors and production specialists. (Have you seen my Before and After pics?)
No wonder the room can spin from time to time, OR that delays are bound to happen. When they do, it's best to stay calm and roll with the punches. But how we handle the unexpected fireworks is an important part of the overall equation. Stay the course and I'll definitely, "show you the money!"
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Julie Gardner, has been writing The Perspective for 15 years and has published more than 600 essays. She is also a frequent contributor to the Sound Off column in the Real Estate section of The San Francisco Chronicle.