5 reasons you don’t want a long closing!
April 21st, 2008 categories: Sellers
In an effort to help anyone out there contemplating a long closing date on the sale of their home, I wanted to share some pitfalls that are very real today. As we all know, or perhaps there are a few sheltered people out there that don’t watch the news, we are in a buyer’s market. Sellers are now pretty much at the mercy of buyers if they want to sell their home. That means Sellers are asking for a myriad of concessions from the Buyer such as paying closing costs, deep discounts on the asking price to long closing time frames to give them time to sell their house, if they have one to sell. My focus today is why you want to avoid a long closing date if at all possible.
A normal time range from contract to closing is typically 6-8 weeks for a sale that requires a mortgage, a cash sale can range from a few days to a couple weeks if the Buyers want to move on it immediately. So knowing the normal time frames, anything outside of an 8 week closing begins to be a liability to the Seller. How? Anything can happen! Here is a list of possibilities to consider when negotiating the closing date.
1. Probably the biggest problem with long closings is that the excitement for the Buyer can wear off and they develop “cold feet”. When cold feet occur, some Buyers will do anything to get out of the contract, including forfeiting their deposit. With the media broadcasting daily doom & gloom, it’s no wonder that Buyers & Sellers are nervous about making a move. Some buyers can second guess themselves in their decision to buy a particular home by continuing to compare other homes on the market. If they perceive that they didn’t get the best deal they thought was out there, the warm fuzzy feeling is out the window.
2. In todays mortgage world, things are changing daily. Bank programs can change or be deleted even after a Buyer has been approved. If your Buyer has narrowly qualified for a certain program, and the bank discontinues that particular program, they may be out of luck qualifying for any thing else! I’ve seen home sales disenegrate the week before the closing because the lender no longer offers the program they qualified the Buyer for.
3. Another result of the mortgage crisis are that many lenders are not accepting appraisals that are more than 90 days old. If you have a Buyer who gets an appraisal within the 90 days, but then decides he needs an extension on the closing date, he will have to start all over again with the appraisal process. Some lenders will allow the original appraisal to be re-certified, which is an update to the comparables data to justify the value, but some appraisers won’t re-certify. So it becomes a nerve racking experience to start from scratch and hope that the 2nd appraisal will justify the value of the contract price.
4. You’re keeping your house off the market! Think about this scenario: Your house goes under contract at the beginning of the real estate high season. You’re very happy and are looking forward to moving on, but you have a long closing of 4-5 months. As you’re nearing the closing date, something unexpected happens to the Buyer, maybe he lost his job and no longer qualifies for the loan and the contract falls through. This would be devastating to everyone, but for the Seller it may mean not finding another buyer until the next real estate high season, NEXT YEAR!Â
5. If something is going to break down in a house, it always seems to happen during the contract period. I’ve seen this happen time and time again, everythings been working like a charm for years and BANG! the A/C system goes on the blink, or the septic system goes awry, or there was a high wind and the roof was damaged, etc, etc, etc. The longer under contract, the longer the chances of something going wrong. I’ve been recommending home warranties to home Sellers just for these occasions.Â
Beyond these major five reasons there’s also the worrying factor of the “what if’s”. What if you move out and now the house is vacant, who will look after it? What if you’ve already bought another house because your house was under contract and now you’re facing having two mortgages? If you have a choice in choosing the closing date, these are just a few of the scenarios you need to think about before accepting a long closing date. It’s not just a matter of waiting out the several months until closing, it’s a matter of anything can happen!
