Monday, September 03, 2007

It's All About Timing

I often tell my clients that the closing date on a purchase contract is much like a baby's due date. Not very many babies come into the world on their due date and not many houses close on the exact date in the contract.

"If you have to pick a perfect moving day, what would it be?" is generally how I start a discussion with a new client. And from there we try to put together a game plan that will accomplish their real estate agenda as close to the target date as possible. There are a lot of variables that come into play and it often gets complicated and unnerving. A current client of mine suggested that I address this topic in my blog and so here goes. Please keep in mind that there are no steadfast rules for real estate timing.

Usually the simplest transaction is a renter purchasing a single family home. Of course the first objective is to find a house. Some buyers will find them the first day out, but more likely buyers can plan on 2 to 3 weeks or more to locate the home of their drams. (And yes, I've have had clients with special needs that have taken more than two years to find exactly what they are looking for!)

The next step is coming to terms with the seller. Usually price is the biggest obstacle as the buyer wants as much money as possible and the seller wants to pay as little as possible. There are, however, other important terms of the contract, including type of financing, timing (does the seller have a place to go?), inspections and personal property included. My experience with negotiating contracts has been that by aiming for a win-win situation, will result in a smoother transaction from start to finish.

Every purchase contract should state a closing date, and as stated above, that date is simply a target that all parties aim for. Usually, financing dictates the targeted closing date, with most FHA and conventional mortgages requiring 45 to 60 days to close. It is not unusual for cash purchases to close in 30 days and SONYMA loans requiring 90 days.

Most contracts require that inspections be completed within a week of the contract being accepted and generally there are three days after the inspection for the buyer to request repairs in writing. If there are major deficiencies in a property, a deal can die here.

Most contracts require that the buyer apply for financing immediately upon acceptance of the contract and has a stated date to provide a mortgage commitment. In most cases, mortgage commitment is presented within three weeks of the contract being accepted.

Once that happens, the attorneys get busy with title work. Sometimes there are title surprises that can cause a delay. Things like fence agreements and mortgages that were not discharged are easy to take care of but take time that was not planned for. Once title issues are cleared up, the bank will issue a clear to close and closing is set.

An interesting twist to real estate timing is when buyers are relocating to the area to take a new job. Most banks will require a paycheck stub before they will issue a clear to close. This creates an interesting dilemma. Usually, you can't start to work until you have a place to live and you can't buy a place to live until you start to work. If you fall into this trap, your realtor may be able to help find temporary housing while you wait for your first check stub.
Another timing challenge is if you have a house to sell. There is no crystal ball to say exactly how long it will take to get an offer on your home and whether or not that buyer has a home to sell or other contingencies.
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