Browsing Category

home closings

The Home Closing Process Amid Coronavirus: The Seller’s Guide to How Long Will It Take

April 17, 2020

Phototreat/Getty Images

Selling your home during the coronavirus outbreak is no easy task. So if you’ve managed to find a buyer and accept an offer despite these challenging times, congratulations! You’re almost there. All that’s left is to close the deal.

Yet not surprisingly, COVID-19 has thrown a few wrenches into the home closing, too. That’s why, in the final installment of our series “Home Selling in the Age of Coronavirus,” we’re offering guidance on what home sellers should expect as they close on their home, and how to navigate these hurdles to stay safe and keep the deal on track.

How long will it take to close on a house now?

Not surprisingly, home closings are taking longer now. At the end of March, closing times averaged 60 days from the time an offer is accepted, up from 43 days in February and 26 in January, says Tendayi Kapfidze, chief economist at LendingTree. They’re likely to take longer still in April.

Why the holdup? In part, lenders have been swamped with processing refinancing applications due to the historically low mortgage interest rates.

“Generally speaking, most lenders are very busy with refis and enjoying record months in closings,” Kapfidze says. “Record closing months will typically lead to delays in days to close. Underwriting turn times are longer today.”

In addition to a backlog in refi underwriting, social distancing and shelter-in-place orders are delaying and complicating every step of the home closing—including home inspections, appraisals, and walk-throughs.

In some cases, home buyers are adding addendums to contingency timelines to account for these holdups, says Tomer Fridman, luxury and celebrity real estate expert at Compass.

If you’re a home seller who’s eager to close the deal or nervous it could fall through, here’s more on what could hold up the various stages of home closing, and why.

Home inspections

Typically, once a deal is reached, home buyers will send a home inspector to the seller’s home to vet it for any flaws. Typically, home sellers are present during inspections, but if this prospect makes you nervous, you can ask for a “remote home inspection” instead.

“We are offering clients the option of doing a ‘remote inspection,’ where we inspect the house alone and review the findings with buyers and sellers via a videoconference,” says Welmoed Sisson, a home inspector and author of “101 Things You Don’t Want In Your Home.”

Furthermore, “while we’re at the house, we use gloves, wash our hands, and wipe down things we touch with antiseptic cloths,” Sisson adds.

“We’re anticipating the need to do this for six months at a minimum, and probably longer,” he says.

Home appraisals

Traditionally, home appraisals—where an appraiser visits the house to assess its value—are required by lenders for any buyer who needs a mortgage. But to keep home sellers safe, the Federal Housing Finance Authority has instructed Fannie Mae and Freddie Mac to temporarily allow exterior-only appraisals or desktop appraisals during the COVID-19 crisis.

These appraisals use public records, multiple listing service information, and other data sources to identify details about the property—and don’t require going inside the home. That’s good news for sellers, although the process could end up taking longer as a result.

Walk-throughs

Social distancing is also affecting buyers’ final walk-throughs, with some being done virtually on FaceTime and others not happening at all.

“The majority of buildings in New York City are not allowing anyone other than owners to enter or exit,” says Peggy Zabakolas, real estate broker at Nest Seekers International in Bridgehampton, NY.

Home closings

Last but not least, social distancing may also delay closings, because some title company offices are closed and in-person gatherings of more than 10 people are prohibited, says Matthew Myre, CEO and lead agent at Berri Properties in Asheville, NC.

The way around this is, rather than having everyone gather in one room, various parties might sit in separate rooms and shuffle papers between them. Some closings are even taking place outside on sidewalks.

Are remote home closings possible?

States such as Georgia announced that, as of March 31, video closings are temporarily permissible—and more states may follow suit. However, remote or virtual closings are possible only in some places and cases, such as for cash transactions and when lenders allow it, Zabakolas says.

For instance, remote online notarization is allowed in just 23 states, but the National Association of Realtors® recently sent a letter to Congress asking lawmakers to expand it nationally to speed up real estate transactions during the pandemic while limiting in-person contact.

Just keep in mind that most of the delays in selling a home during the COVID-19 outbreak are beyond anyone’s control—and are a good thing in that they’re meant to protect home sellers (and buyers) from unnecessary exposure risks that might come from in-person meetings.

The post The Home Closing Process Amid Coronavirus: The Seller’s Guide to How Long Will It Take appeared first on Real Estate News & Insights | realtor.com®.

6 Crucial Questions to Ask a Title Insurance Provider

November 11, 2019

alexskopje/iStock

Shopping for title insurance may not be the most thrilling step in buying a house, but it is one of the most important.

Before you can own a home, or “take title” to a property, most lenders will require a title search of public property records to make sure there aren’t any issues in transferring the property into your name.

For example, title issues can crop up due to liens on the property (say, from a contractor who did work on the house but wasn’t paid), unfulfilled financial obligations such as unpaid taxes, or claims of ownership from a long-lost heir. In such cases, a home seller may not have the legal right to transfer ownership of the property.

To protect against any financial loss, two types of title insurance exist: lender’s title insurance and owner’s title insurance. The lender’s title insurance policy pays for the expense of researching a claim and any court costs incurred as a result of any disputes they uncover.

Owner’s title insurance, meanwhile, protects you as the homeowner during any future disputes over ownership of the property.

Lenders require borrowers to purchase lender’s title insurance. Owner’s title insurance, however, is optional—but, given the protections it provides, buying it is a smart move. (Generally, home buyers use the same title insurance company to purchase both policies.)

Unlike homeowner insurance, title insurance is taken care of as a one-time payment that’s made when (or shortly before) you close on your house.

Now that we’ve got the basics of title insurance squared away, let’s look at some of the more surprising questions you probably never thought to ask a title insurance provider but totally should. After all, as the home buyer, it’s your choice which title company you decide to use.

1. What are your title insurance rates?

Although this might seem like an obvious question, some home buyers forget to ask it. And that can be a big mistake. Why? Because even though the average cost of title insurance is around $1,000 per policy—which covers all upfront work and ongoing legal and loss coverage—the price can vary widely, depending on where you live and the price of your home.

In many states, including Texas and Florida, title insurance premiums are set by the state, meaning that you’ll pay exactly the same amount no matter what title insurance company you choose.

However, some states, like California and New Mexico, do not regulate title insurance fees at all, and rates can vary widely from one title agency to another, says Rafael Castellanos, a managing partner at Expert Title Insurance Agency in New York City. If rates aren’t preset by the state, they’re negotiable.

It’s advisable that all home buyers find out what a title insurance company’s rates are before they choose an insurance provider.

2. What has been your most challenging title search, and how did you handle it?

Some title searches are easier to clear than others. While there’s no telling how difficult yours will be, you want a title company that can handle complicated problems.

“There are issues that we run into on residential properties that can be complex, and we have to go to great lengths to resolve them,” says Tim Evans, owner of Evans Title Agency in Troy, OH.

Ask how a title company solved their most challenging title search, and you’ll gain some valuable insight—and some assurance that the company will be able to troubleshoot issues during your title search if any should arise.

3. How much experience does your title insurance attorney have?

A title company’s attorney is the person who is going to determine whether you can legally take title of the property and receive title insurance. Using a title company with a seasoned attorney, therefore, is crucial.

However, “in the early 2000s, it was very common to see people forming their own title insurance agencies after just a few months,” Evans says. “Though that’s less common today, you can still run into title attorneys who have very little experience.”

4. What’s your company’s ratio of title claims to customers?

Because title searches can be complicated, claims are an inherent part of the business. However, some title companies are more “liberal” than others, Castellanos says, with respect to whom they will—and whom they won’t—issue title insurance.

“Some title companies pay lots of claims, which can put a lot of stress on their clients,” says Castellanos. “You want a title company that is incredibly careful and conservative.”

So, how many title claims are too many? Title insurance claim rates are approximately 5%, according to industry estimates.

As a result, here’s a good guideline: If a title company has had a lot of title claims relative to the volume of their business—say, 1 out of every 10 customers—you’ll want to continue your search.

5. How long does it take for you to complete a title search, on average?

Depending on the terms of your home sales contract, you may be under a tight deadline to reach settlement, warns Kimberly Sands, a real estate broker in Carolina Beach, NC.

Of course, you won’t know that until you actually make an offer on a house. But, since it’s a possibility, you’ll want to find a title company that can conduct a title search in a timely manner, Sands says.

Typically, the whole process takes about two weeks. If a title company says that it will take significantly longer to complete a title search, using that company could force you to delay closing, which could potentially cause your whole home purchase to collapse.

6. Do you belong to any professional associations?

While being a member of a professional association certainly doesn’t guarantee that a title company is good, title agencies that belong to industry groups are often held to a higher standard, says Evans.

Organizations like the American Land Title Association (ALTA) also offer their members unique education programs, business tools, and industry certifications that will serve clients well. Moreover, membership in an industry group adds a layer of credibility for an insurance provider.

The bottom line

Title insurance can be confusing for home buyers, but it’s an essential protection of homeownership. So, in addition to asking the questions above, take time to read online reviews and talk to your real estate agent before picking your title insurance provider.

The post 6 Crucial Questions to Ask a Title Insurance Provider appeared first on Real Estate News & Insights | realtor.com®.

Need a Mortgage Fast? You’re in Luck: The Home Closing Process Is Speeding Up

August 20, 2019

CatLane/iStock

Once your offer on your dream home is accepted, it doesn’t mean you can just grab the keys and move in. If you need a mortgage, securing this home loan takes time. The good news is that it’s faster now than ever.

According to a recent three-year study by LendingTree, the length of time it takes to get a mortgage—aka closing—is an average of 40 days in 2019. That’s down from 51 days in 2018, and 74 days in 2017.

And here’s some good news for homeowners who’ve already moved in: The time it takes to refinance a mortgage is also dwindling. Refinancing takes an average of 38 days in 2019, down from 43 in 2018, and 55 days in 2017.

Home buyers should be thrilled to hear that the mortgage process is speeding up—who doesn’t want to move into their new home as quickly as possible? Earlier closing times can also save home buyers money, especially if they are paying high rent or having to find temporary housing while waiting to move into the new home.

Why it takes less time to get a mortgage today

The digitization of the mortgage process is the main reason for the shorter closing times, according to the LendingTree report. The mortgage industry has become increasingly digital since the 2008 financial crisis, when companies operating in the paper-centric system of the past lost or misrecorded some details from their clients, causing problems and legal issues during the foreclosures that often followed.

Since then, some lenders have created new mobile-friendly products to speed up the mortgage-approval process. For example, Quicken Loans launched the app Rocket Mortgage in 2015 to help borrowers close earlier than the industry standard, reportedly sometimes as quickly as eight days.

Another factor contributing to shorter closing times is that mortgage volumes have been decreasing, says Tendayi Kapfidze, chief economist at LendingTree. However, he says that given the recent drop in interest rates, “that’s kind of reversed itself a little bit, but we’re still seeing shorter times than in 2018.”

The LendingTree study also found that loans for smaller amounts took longer to close. Loans of under $150,000 averaged 47 days, versus 39 days for those above the conforming loan limit, which is $484,350 in 2019.

“You’d think something being more valuable or bigger risk for the lender, they might take a little bit more time with it, but it’s the exact opposite,” Kapfidze says. One possible reason is that lenders may require a more extensive appraisal for lower-priced homes, which might have some type of damage or other problem.

How to get a mortgage fast

So what can consumers do to reduce as much as possible the length of time it takes to get a mortgage? To speed up the closing process, Kapfidze urges home buyers to choose a lender with a more digital, less paper-driven process. Before signing on with any lender, ask if the company can digitally link to a borrower’s bank, the IRS, or other institution to get information to process the mortgage, since this is the key to a speedy approval.

Online lenders make it easier for borrowers to compare mortgages, and they often offer better rates and faster approvals, but they come with less customer service, so they may not work well for complex home loans. Mortgage industry experts suggest that borrowers look over the application process, check out online reviews of the company, and make sure it is registered with the Better Business Bureau before they sign up.

Here’s more on how to get a mortgage fast:

Work on your credit score

Before starting the home-buying process, make sure your credit score is in check. According to the LendingTree study, consumers with higher credit scores saw shorter closing times.

People with a credit score of above 760 have an average 38-day closing time in 2019, while closings take an average of 45 days for those with scores of below 720.

Have your financial documentation in order

“A lot of the delay in closing times is just the back-and-forth between the lender and the borrower,” Kapfidze says. He suggests having all documentation well-organized and easy to access, so that it doesn’t take long to send it to the lender.

Also, make sure that all the information that you provide is accurate, he says. If a mortgage lender goes to verify something and finds a discrepancy in what a borrower provided, that can slow things down.

The exact documentation that borrowers need to provide depends on the type of loan they’re seeking, but generally, the required documents relate to a borrower’s income, assets, and employment, such as a W-2 form, pay stubs for the previous 30 days, and bank statements. Borrowers also need valid identification, a loan application, a contract for the home purchase, and homeowner insurance contact information.

Get pre-approved for a mortgage

Many loan experts urge home buyers to get pre-approved for a mortgage before they start shopping for a home, especially if their financial situation is complex. A pre-approval helps buyers better understand what type of home they can afford and can shorten closing times.

“You’re going to have to go through this process at some point anyway, so you might as well get it out of the way upfront as quickly as you can,” says Hayden Hodges, a Dallas-based mortgage loan officer at U.S. Bank. “I would want to know what my ceiling is, what my conditions are, as quickly as I can, as opposed to perhaps getting into unnecessary fire drills towards the end of a transaction.”

Lenders can work quickly to get borrowers pre-approved. Borrowers can speed up the process even more by providing all the documentation needed for pre-approval, Hodges says.

Make sure you have cash on hand

Having cash available to supply earnest money and to pay closing costs can help you close faster, Kapfidze says. Some closing costs need to be paid in cash, so make sure you can easily access the funds.

“You don’t want to get to closing, and it’s like, ‘Hey, you need to have a $12,000 check,’ and then realizing your money’s not liquid,” he says.

The post Need a Mortgage Fast? You’re in Luck: The Home Closing Process Is Speeding Up appeared first on Real Estate News & Insights | realtor.com®.