It’s Closing Time … What Could Possibly Go Wrong?
In 1967, a pair of psychiatrists decided to assign a points value to the most stressful life events as an indicator of whether stress can make people physically ill. Among the items listed on The Holmes and Rahe Stress Scale are the obvious contenders: Divorce, death of a spouse and imprisonment. Unsurprisingly, listed among the 43 “Life Change Units” are a series of situations that apply to real estate scenarios, including the acquisition of a large mortgage or loan, change in living conditions and a change in residence.
Though closing on a home does not specifically appear on the list, anyone who’s been on either the seller or buyer side of the process can attest to the stress it can cause, especially when the unexpected happens.
According to the Home Buying Institute, the things that can go wrong before closing day are numerous. As a buyer, some of the most important things to do (or not do) before the big day include:
- Keep your financial situation the same was when you first applied for a loan. This isn’t the time to buy a new car, open a line of credit or withdraw/transfer money from your account, so create a voluntary spending freeze.
- Acquire a cashier’s check for the amount enumerated on the HUD-1 Settlement Statement you’ll receive a few days before the closing date. This statement will have the finalized list of fees for which you’re responsible.
- Be sure to have a homeowners’ insurance policy in place.
- Avoid changing jobs before closing. If your income goes down, it will negatively affect your debt-to-income ratio, and entails many paperwork changes to the loan documents.
If possible, take a moment to review the documents prior to the big day for typos or incorrect information, either of which can delay closing time because they’ll need to be re-drafted. The money pros at the TheMotleyFool.com suggest previewing the aforementioned HUD-1 settlement sheet prior to the closing, as it lists all of the closing costs and loan details. This can be viewed at the Department of Housing and Urban Development site by clicking here.
MSN Real Estate notes that a common delay in closing occurs when one or more parties fails to bring an important piece of paper or ID to closing, so make a list of the essentials with your title agent and other real estate professionals, and create a file to bring with you that day.
When it’s finally time to close, push for an appointment early in the day to allow for the unexpected, and anticipate a crowd in the closing agent’s office. This can include the home seller, seller’s realtor, title company representative, attorneys (in certain situations), buyer and lender. In reviewing this ragtag crew of characters, it’s important to note that one of the things that can go wrong is having certain parties fail to show, such as just one spouse from a divorced couple appearing when the title is in both their names, or the failure any other party to show who didn’t realize they needed to be present.
Another delay can occur if the buyer doesn’t have the funds necessary to cover their portion of the closing costs, or if other mortgages have not been paid off prior to the closing transaction.
However, most closings go off without a hitch, with a smooth transition of property from seller to buyer, and the ceremonial exchanging of the keys signaling the end of an era and the start of a new beginning.