Beginning in October of this year, new rules take effect that will change decades-old aspects of buying and selling real estate. Although there are many aspects to the rules, there is one that is critical to you and should be understood before signing any documents. So, what do you absolutely need to know?
Your closing date can no longer be set in stone.
The “closing date” is the day that you sign documents, the deed is recorded, and most importantly, YOU RECEIVE YOUR SALE PROCEEDS! The closing date is established in the written offer and the “Purchase and Sale Agreement” that you will sign at the beginning of the process. As the Seller, you are expected (and contractually required) to deliver the house fully vacant and clean on the closing date.
For eons, the days leading up to a scheduled closing date often resembled a grade school fire drill. Although the parties fully expect and have planned to trade money for keys on the closing date, the days and hours leading up to the closing date are usually full of last minute closing chaos. The lender may have not issued a final loan approval, and the buyer is scrambling to comply with the lender’s last minute request for a certain document. The document is received, but after review, another document is required. The lender reviews the second document late in the day, a final underwriting review takes place, and presto, the “clear to close” finally issues. The file is then transferred to the lender’s closing department, and an hour before the scheduled closing a closing package is delivered to the closing attorney. The closing attorney plugs numbers into the software program and sends the buyers and sellers “closing numbers” (how much does the Buyer need to bring; how much will the Seller receive). The Buyer runs to the bank and waits in line for a treasurer’s check. Five minutes before the closing, the Buyers (AND SELLERS) arrive at the closing attorney’s office. Pens are distributed, and a blur of document signing follows!
Due to the new disclosure rule (TRID), the pre closing scramble will be a thing of the past. Under the new rules, no closing can take place until the third business day after a) the buyer’s loan has final approval; b) the lender has issued to the Buyer and the Buyer has acknowledged receipt of a document called the “Closing Disclosure” (“CD”). The CD contains the “closing numbers” and informs the Buyer what they needed to bring to the closing. The wonderful thing is that the Buyer and Seller have 3 days to carefully review numbers before documents can be signed. The not so wonderful thing is that the Buyer cannot waive the three day requirement, so situations may exist where the closing date in the purchase and sale agreement cannot be met due to the waiting requirement.
What do you need to know?
Under these new rules, the number of instances when closing delays occur will increase dramatically. Buyers (and their brokers and attorneys) will have far less control over the date your sale actually closes, regardless of what is in the purchase and sale agreement. This is not the Buyer’s “fault”. Rather, the federal government has mandated that there be a three day period where there used to be none.
What can you do?
As Seller, we suggest that you:
- Be flexible and patient – remember, delays will happen, your buyer will be as stressed as you!
- Be prepared – if there is a delay, how will your mover handle it? Consider whether the mover can make a change last minute; what will the mover charge if they store your things on a truck during the delay?; do you have a place to go if your furniture is on a moving truck?
- Avoid the busiest closing dates – traditionally, most closings are in the last couple of business days of the month. Speak with your broker about avoiding these dates before you sign your initial offer.
- Reserve rights – if you are buying as well as selling, be sure to reserve the right in your offer and subsequent Purchase & Sale Agreement to delay your purchase closing if your sale gets held up.
- Help yourself and the Buyers: SELLERS can help themselves and the BUYERS to close on time by providing any and all requested information in a timely manner. Final Readings and/or adjustments, Smoke and Carbon Monoxide Detector Certifications and Title 5 (Septic System) Certifications should all be provided to the Closing Attorney’s Office a promptly so that no delays are caused by the Sellers.
Yes, your broker will have team members ready to assist you throughout the process. These team members may include an attorney, title V inspector, mover, and a handyman to deal with inspection issues. Follow your broker’s advice on forming your team. The recommendations will be based on who your broker has learned he or she can count on for responsiveness, knowledge, and integrity.