Two important changes were recently passed by Congress and then adopted by federal agencies that will now have an impact on how quickly -- and in some instances, for how much in closing and/or upfront costs -- home purchases can be closed. Technically designed to control lender inequities, these two new regulations have great impact on you, the buyer and the seller! Without commenting on whether these two new regulations are effective and well constructed, it's important to understand that closing a home purchase is just gonna take longer!
In the very recent past, it wasn't unheard of for a well-qualified buyer to make an offer on a home and close the sale within 3 weeks or so. Most transactions closed within 30 days. Not so much now, and here's why:
On the surface, this law, originally initiated in New York, seems like a reasonable protection for buyers in that the appraisal process is supposed to now be more impartial. In reality, as agents we're finding that the process needed to complete a lender's requirements for appraisals is difficult and time consuming, pushing out the timeline to accomplish the appraisal up to two weeks or so! Adding in the fact that many lenders are also now requiring a 2nd appraisal, which may add yet another week or so or more, any purchase and sale agreement must allow for at least two extra weeks beyond that common 3-4 week period. Finally, as a Buyer, unless you waive your right, you have 3 days before closing to review the appraisal. ... Now we're up to, say, 4-5 week minimum for closing.
Oh by the way, guess who pays for the second appraisal should it be necessary? Not the lender, I guarantee you. The Buyer pays. Oh yes ... and if you're a seller committed to paying buyer closing costs through your contract, you may find that the request for closing costs is $400-$500 higher!
One more quick note here: the HVCC does not apply to VA or FHA loans, although I'm being told that many/most banks are just applying it straight across the board to all loan types.
- Effective on July 31, 2009, will be yet another regulation, the Housing and Economic Recovery Act (HERA), designed to protect you, the consumer, but also with an impact on time needed for closing. Of course, none of us has yet to see this in action.
HERA works with the Truth in Lending Act (TILA), designed to inform the consumer about all costs and fees involved with placing a loan.
One of the HERA requirements surrounds when a lender can collect upfront fees, such as paying for a credit report (which can be collected at the time of application), or paying, say, for that appraisal, which can't be collected until at least three days after application. If you make application by phone, you'll then have to march down to your lender's office the day after receiving your initial disclosures (they have seven days) to pay any other fees.
One of the biggest requirements, however, has to do with when a lender must disclose changes affecting the Annual Percentage Rate (APR) of the loan. Up to now, most lenders with whom I've worked, provide a buyer with a Good Faith Estimate (GFE) within a day or two after taking a loan application. That GFE was rarely updated throughout the loan process unless the interest rate substantially changed. With HERA, however, the disclosures made by a lender must be updated if the APR changes as little as .125%. Whew! Remembering that the APR includes not only the loan's interest rate, but all the costs of creating the loan (loan origination fees, fees charged by a closing/escrow agent, bank fees, wiring fees, etc.), it's easy to see why the HERA requirement will add yet another layer of time complexity in closing a sale.
In addition, HERA requires that a Buyer have three days prior to closing to review the final disclosure, commonly referred to as the HUD statement around here.
So ... here's the deal: If you're writing an offer to purchase, let's be realistic and work toward a 45 day closing as a standard practice. If you're a seller, try to be patient. Much of the delay in closing, now, may have little to do with the buyer's ability to perform. It could just be the lender trying to be sure that all of these new requirements are met.
Your Dedicated Realtor & Active Rain Blogger, working the Auburn, Kent, Renton, Maple Valley, Federal Way, Covington, Puyallup, Sumner, Bonney Lake, Lake Tapps, and north/northeast Tacoma areas.
Farmers markets are the best place to stock up on fresh fruits, veggies, 
flowers ... and kettle corn! That's definitely the case at the Auburn International Farmers Market, held every Sunday from June 14th into September or so.
One of the stickiest questions on a seller disclosure form asks whether permits were obtained for any remodels that were done ...
Making an offer to purchase a home in Washington state is complex. It's not unusual for a Buyer's eyes to glaze over a bit when faced with the stack of 20 pages or so that comprise a typical offer on a new(er) home built in a subdivision or city. Add to that "typical" stack unique properties of homes with septic systems or private wells ... or any of what seems like a bazillion unique features ... and the stack of pages just seems to grow exponentially.
What happened to taking pride in the American dream? When did it become acceptable to write on the walls with markers, splash paint on carpets, urinate on the floors, smash holes in the doors? I mean even if some of this is from pets ... good grief!
The young receptionist in my office always has the greatest smile on her face when you walk into the office. It just radiates throughout, carrying through to every person that walks into the room. It just makes you feel welcome, makes you want to stop and chat, exhibits a sense of trust and overall "I'm so glad you're here; how can I help?"