Few things are more frustrating than having a deal lined up for a new home and having the sale fall through prior to closing. A new report by Trulia shows this frustration is on the rise, as an increasing percentage of home sales across the U.S. never reached their conclusion in 2016. Trulia found that 3.9% of homes switched their listing status from "sale pending" back to "for sale," almost twice the rate of 2.1% in 2015.
The failure phenomenon was widespread, including almost all of the major U.S. metropolitan areas and covering the full range of home prices. However, failure to close did occur more frequently with less expensive and certain older homes. In the starter-home category, 6.3% of pending sales fell through, and sales of homes constructed during the 1960s fell through more often than both newer and older homes in the same market.
Trulia does not give the reason for the discrepancy, but it seems reasonable that starter homes and first-time homebuyers are more likely to run into unanticipated problems such as a last-minute problem with the mortgage application, an unexpected appraisal or home inspection result, an unclear title, or failure to meet (or understand) contingencies.
Regardless of the national trends, you can take a few steps to make sure that your home sale or purchase is more likely to proceed smoothly.
- Ask for a Checklist – The closing proceedings can be a confusing flurry of documentation and payments, especially for first-timers. Most lenders have a checklist of necessary activities and closing documents to help you keep track. If not, a generic checklist is available online from the Consumer Financial Protection Bureau (CFPB) along with other useful information about the closing process. Review the requirements with your mortgage lender before you begin and you are less likely to be tripped up by last-minute requests.
- Manage Your Finances and Cash Flow – You will need to provide proof at closing that the down payment funds are available, including closing costs. Make sure that you understand exactly how much money will be required at closing, and don't stretch your luck by making other large purchases in the same timeframe. If you are counting on income via direct deposit, verify that the funds will be available when needed.
It's also important to control your purchases and keep all bills paid to avoid any credit score surprises. A last-minute check of your credit score could give the bank a reason to reconsider their offer based on increased risk. Don't go into a mortgage application ignorant of your credit score and its effects. Check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.
- Call Your Lender – Simple communication errors derail closing ceremonies all the time. It's best to take the initiative and contact your lender the day before your closing just to verify that you have all the documents that they require. This gives you time to handle any last-minute requests without scrambling. If you have a closing agent, verify that he or she has the necessary documents in hand on the day of closing — again, giving yourself a little time to correct any issues.
- Leave Plenty of Time – A closing proceeding is not like running down to the local burger joint for lunch. The process can take time. Give yourself the day off to take care of any last minute issues and avoid the sort of time pressures that lead to mistakes and poor decisions.
Like most things in life, a mortgage closing will have a greater chance of success with superior planning and communication. Don't be left at the last minute wondering what happened to your dream home. Take the necessary action to make sure that you experience the satisfaction of holding your new front door keys in your hand.
Check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.