15 Things That Cause Delay in Home Closing Process

Real estate transactions are notoriously unpredictable. Following many weeks of due diligence, a closing can fall through or experience significant delay, even on closing day itself. By knowing the common causes of these delays, buyers can be better prepared for keeping the process moving forward.

Title Issues That Cause Delays

1. Child/spousal support liens. Delays can happen when a divorced spouse either forgets or simply fails to remove a lien imposed over child support—even if it’s an issue from decades ago. For example, a child may inherit a home from his father, but if the mother had placed a child support lien, it can still show up in the title search and prohibit the prompt transference of the title.
   
   
2. Creditor liens and judgments. Another common title issue is the presence of a lien or judgment won by a creditor—usually as the result of a lawsuit against the current lender or as a result of defaulted payments. In these cases, the home may not truly be the seller’s to sell.
   
   
3. Probates. When someone dies without the proper will and trust in place, their assets can go into probate—a legal process where a judge must determine valid asset allocation. Property titles tied up in probate will not be easily or quickly transferable.
   
   
4. Family trusts and estate planning issues. If the home in question was part of a family estate, there can be issues related to the trust or to the execution of power of attorney. Note that the terms of a trust or will must be followed with precision, as these are legally binding documents.
   
   
5. Improper execution of documents. A lack of proper execution for title-related documents can always be a hindrance to the home buying process.
   
   
6. Incomplete statement of identity. The title company will need you to complete a statement of identity, helping them to avoid any confusion between you and other people with similar names. Proper completion of this document is essential.

All of these title issues can be avoided by providing as much information as possible, as soon as possible to your agent and to the title company you’re working with.

Additional Delays in the Closing Process

Some other common sources of closing delays, not directly related to the title process, include:

1. Invalid Power of Attorney. The seller does not actually have to be present at the closing if he or she gives proper Power of Attorney to another party—in many cases, the listing agent. But if this Power of Attorney is not legally valid, it can cause significant delay. Make sure the Power of Attorney is approved by both the closing agent and the lender, well in advance of closing day.
   
   
2. Problems with Closing Disclosures. This federally-mandated form must be provided to each principal at least three days before closing. If these forms are not received or if they have incorrect information, it’s vital to notify the lender immediately.
   
   
3. Closing cost credits and rent-backs. The deal struck between the buyer and seller may sometimes involve credits for closing costs, or rent-backs—most often arranged when the seller wants to stay in the home for longer than first anticipated. These issues will need to be resolved in advance of closing day.
   
   
4. Closing cost credits not approved by lender, or found to be in excess of actual costs. This often happens when an agent credit to the buyer was not previously disclosed or was not approved by the lender.
   
   
5. Improper ID. The principals involved in the transaction—both buyer and seller—should arrive with their proper photo ID—a valid driver’s license or passport.
   
   
6. Issues with the California Good Funds Law. Closing funds for the down payment and closing cost, if received by the escrow company in the form of a cashier’s check, could cause some delay, as the escrow company will need to wait for the check to clear. Using a wire transfer is a much better way to send closing funds to the escrow company.
   
   
7. New employment. If the buyer starts a new job within a month of the scheduled closing, it could lead to a major delay. The lender will always need Verification of Employment, which typically requires the first complete paystub from the new job along with a sign-off by the loan underwriter.
   
   
8. New purchasing contracts. Another potential delay: The buyer enters into a new contract to purchase another property and starts the application process within days of the scheduled closing. This would cause delay because the lender would find out and require that the buyer show proofs that the new contract has been cancelled and the new loan application has been withdrawn.
   
   
9. Large new deposits. When the buyer accepts large new deposits into their bank account, within days of closing, it has to be reviewed by the loan underwriter. It will be imperative to successfully source the deposit before the loan can be closed.

The buyer should be aware that quickly and fully disclosing all pertinent legal and financial information, both to the agent and lender, is the best way to keep the process on track. To learn more, or to enlist help in your real estate transaction, connect with Tiger Loans today.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.