It's Closing Day! Everything has gone like clockwork and you have nothing but the formalities of closing between you and home ownership! The mover's truck is in the driveway and your family and friends have gathered to help you move in. Tonight you will spend your first night in your new home!
THE PLAN: You'll spend an hour at your attorney's office with your Realtor, signing all the closing documents, and then you'll be presented with the keys to your new kingdom. You'll head straight to your new home, open the door for the waiting crowd and let the unloading begin! You will happily eat pizza while sitting on the floor, hang sheets over the windows for instant privacy and search high and low for the bath towels that somehow ended up in an unmarked box. But that's all part of the fun. What could possibly mess up this day?!
REALITY: The phone rings just hours before closing. The loan package from the lender has still not arrived at your attorney's office. They cannot prepare your HUD-1 closing statement for signature. The underwriters have been doing their final perusals before issuing the package and releasing the funds you need to buy your home. They have hit a snag. (I'll leave it at that...the form those snags can take in this new world of lending can be myriad.) Your attorney, your lender and your agent all assure you that it will be worked out. But...your closing is going to be delayed! A couple of hours? Maybe. A full day or even two? Possibly.
PLAN B: First, let's talk about what Plan B is NOT. It is NOT that you will call your agent and ask them to get you the keys so you can move in anyway. It is not that you will unload the entire contents of the van into the driveway and wait. The movers need to unload and get on to their next job? I hear you. You have a tight schedule the next day/week/month and NEED to have the initial phase of moving behind you by tonight? I hear that too. The whole family is with you and a hotel will cost you a fortune? Yep, I get it.
Unfortunately this is what you need to hear. The seller still owns the home. This means the seller STILL carries the insurance on the property OR may have canceled it effective this morning. Stuff happens. This new home is unfamiliar territory so how about a worst case scenario; a child or a friend is seriously injured on the property. Someone leaves packing paper on the stove and a fire starts. Insurance only covers “stuff” if they can't prove it isn't their responsibility. Your “stuff” is not the sellers “stuff” and therefore the seller's insurance is most likely NOT going to pay for it, especially if you are in the home without the seller's agreement. Since you do not own the home until you have closed on it, your insurance is most likely not going to pay for anything that happens either, under the theory that you cannot insure what you do not own. A better Plan B is clearly in order.
A BETTER PLAN B: Give yourself a buffer of at least a day between closing and moving in.
Don't close on a Friday because if things go south you will be waiting until Monday to close. (Talk about a quick way to mess up your carefully laid plans!)
If you absolutely must move in on your scheduled closing day, negotiate ahead of time, through the agents involved, exactly what will happen if your closing is delayed. In North Carolina you may be able to negotiate a Buyer Possession Before Closing agreement. Keep in mind that the seller is not required (and in most cases not smart) to give you occupancy until you own the home.
Talk to your insurance agent and ask if there is a plan available that would cover such a scenario.
Above all, understand that some things are simply out of the hands of even the best lenders, agents and attorneys. Plan B may not necessarily be your ideal but it is always better than the alternative...especially if you don't have one!
It's Simple...When You Have A Great Agent!
SarahGray Lamm is a licensed, full time, residential real estate professional in the Raleigh Durham area of North Carolina with over 60,000 hours of experience. She specializes in serving the real estate needs of home sellers, home buyers and investors in Chapel Hill, Carrboro, Durham and Northern Chatham County and is proudly associated with Allen Tate Realtors, the Carolinas #1 independent realty company.
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Sarah,
Excellent insights to a major problem. This is especially relevant with closings on short sales that have many last minute delays.
Great post and simple reminder that things do happen and closings get delayed. Be prepared.
great post
all buyers and sellers need to read this
thanks
Hey.... I know those cats! Great photo!
This happens far too often not to be addressed as a possibility early on in the closing process.
Great post!
Sarah
This is a excellant post. We have all ran into this if we have closed very many homes. This is a gut wrenching situation. I have explained this to my buyers so many times up front so they are well aware of what could happen. The norm is the truck arrives the night before and has to be unloaded that day or the buyer has to pay a daily penalty. I am like you give yourself a couple of days. If the home closes and all is well go in and do some touch up and spot cleaning before you are tripping over boxes etc. Have a great weekend. Happy Sales!
Good morning all!
@Dave - I must say, short sales would generate a much longer Plan B from me! I would absolutely advise a short sale buyer NOT to make hard and fast plans for moving in. They will almost surely be obliterated! Thanks for bringing it up!
@Ilona - It isn't just boy scouts who need that motto today! ;-)
@Richard - Thank you!
@Waynette - I imagine you do know them! I LOVE their "king sized" bed!
@Jim - It is a tough situation! My buyers are prepared for this but all too often I find the buyer on the other side of one of my listings to be caught off guard. I hate to be the heavy but my seller must be protected!
Sarah this is a great post, I'm suggesting it! I never schedule closings on Friday, because you're just asking for trouble then. The buyers/sellers are planning on moving through the weekend and something goes wrong at the last minute.....it's just a big mess!
SarahGray - such a timely post, especially in today's market where delays and surprises seem more and more prevalent. I've personally had this experience at least once and it's not fun, even if you have a good Plan B. I always talk with buyers and sellers about these issues since you never know and folks NEED to be preapred and have a contingency plan in place.
Jeff
Hi SarahGray!
This reminds me of a listing I had that was suppose to record and didn't. Despite the sellers giving directions that the buyers are not to move in until recording, the buyers started moving in anyway. I immediately called their agent to put a halt to the move. She defended her buyers...it took several conversations before she was convinced that this could not happen. Evidently she placed the blame for their situation squarely on my shoulders. To this day (several years later), these people still think of me as that *#&%*!
SarahGray,
AMEN! Just attended a four hour closing yesterday morning - 10am that should have been 45 minutes tops. Those myriad of issues are mind-boggling and make a Plan B, a requirement, not an option.
All the best, Michelle
This is such an important post. I think as agents this might be where we fall down...normally by this time we've done most of our "job" and it's lender-related now. As much as we try to prepare our clients for this delay, they don't understand. They expect to close on the day they were expecting.
I so often get the panicked calls from buyer's agents wanting to get the keys before the close....really? never, never!!! "oh but it's already vacant" yep and it has to stay that way until title transfers...I'm sorry, it's not about being "nice" it's just protecting my sellers.
For sure never give the keys early. But also, don't wait until a few hours before closing to find the loan package isn't ready. When my client is the buyer, I push the lender to get the package to title early enough that we get the HUD-1 a day or two BEFORE closing. Of course, the lender I hope my clients will choose to work doesn't need any pushing, she gets things done.
STILL - plan B is a good idea. Many other things can happen.
Such an important thing to discuss with buyers so they aren't blindsided if there is a delay. And since delays are more & more common it seems - having a plan B is essential! And I SO agree that a Friday closing is just asking for trouble!!
I've learned to always designate closing to be on Wednesday. No Friday delays. No Monday morning blues. And I still discuss the possiblility of delays with the client.
Sarah,
Thanks to Karens, I found one of the most rebloggble post ever. Thanks for addressing this important topic, inclusive of pro-active suggestions. Reblogging.
Great advice for home buyers. Thanks so much for sharing.
Murphy's Law can get you on this! It's a good idea to schedule some buffer time between closing and possession! Last minute glitches can give everyone headaches.
Just had a different but similar situation. AZ purchase contract reads that we will close on or before specific date. Buyer is from Kentucky and using Kentucy lender. From the day we got property under contract, I (along with buyer) have been telling LO we wanted to close as quickly as possible. Buyer signs docs August 6. Monday August 9, I contact LO and ask when they will fund so title can record. LO says we are waiting on seller. Nope, seller has signed and we are waiting on funding. Back to LO, contract reads August 16....that's when we are closing....no if ands or buts! Can't change closing date. Wait a minute....AZ contract reads "on or before" Too bad. Wrong......I pushed and they funded and we were able to record yesterday!
I had prepared my clients that we definately would not close on the 6th and it could possibly take until Wednesday of the following week. I'm glad I had them semi-prepared since it actually took 2 more days, but they were grateful that I kept them in the loop.
When it came down to it.....it meant more paperwork for the LO and his closer. When push came to shove, they did the right thing.
I think in todays market it is even more important for buyers to know about the possible delays and to have a solid and safe Plan B....and yes never ever plan a closing for a Fri.....
great examples of plan b not working
by the by as a listing agent i would never advise the seller to allow the buyer to occupy said property before close... never ever ever never ever
there are good reasons posted... and then there's the reality that if things get worse ... that person is in possession of the house now and has rights they wouldn't have had otherwise... now who's the jerk? i would be in my client's eyes for not seeing this blind spot...
nevvvvvverrrrr
SarahGray...
It seems that more and more closings are delayed these days, and your suggestions offer excellent advice for alternative plans of action!
@Erika - thank you! And I agree...Fridays have been added to my taboo list along with last day of the month, if at ALL possible!
@Jeff - Yes, I've run into it twice in the last six months myself where it was quite touch and go. Nobody is happy and I don't LIKE it when my peeps aren't happy!
@Paula - You know tht feeling you get when you KNOW there is an issue with closing and the buyers agent goes to do the walk through and "promises" to bring the keys and the lockbox to closing? I've started warning them against even thinking about giving keys to the buyer...I WILL make a federal case of it!
@Michelle - Been there too! Four hour closings can mess up many a day!
@Karen - I'm no longer surprised to get that call. As you say...Never...my seller isn't paying me to be "nice."
@Joette - I agree but lately pushing seems to sometimes have no effect. Unfortunately there are times when even the best lender in the country is being ignored by the underwriters.
@Nancy - And blindsided is exactly how they feel! There is very little that can counteract that feeling once it happens!
@Glenn - Don't you wish Wednesdays had 48 hours in them? ;-)
@Mary Kay - You are welcome...and thank YOU!
@Roy - Gorgeous flowers! Thanks for showing up with them!
@Vicki - Murphy's Law was probably written because of this! Very tough on everyone!
@Susan - Good work! And I find that most lenders are diligent about doing the right thing when they know all the facts! It's tough to be a lender these days...I think even tougher than being a Realtor!
@Dennis - I'll fight ya for the only Wednesday closing time left on the attorny's calendar! ;-)
@Vince - Agreed. I always outline the worst case scenario (the loan NEVER closes) for the seller so they are making an informed decision. If they agree to it anyway we negotiate the proper instrument to protect them. All in all, a bad idea.
@Richard - Thank you Richard! Compliments from Coweta carry a special meaning!
I'll go ahead and add my Amen, SarahGray. Thanks for such an important reminder to agents about how to help their buyers (and sellers actually).
This happened to me once - with no plan B in place. We had to pay the movers to store the truck for several nights and sleep at my mother-in-law's house . . .
Well Said! So much can go sideways in a deal and buyers should be ready with alternate plans.
SarahGray in the world of stuff happens this is one of them. More than once I've seen buyers with the moving truck idling in the driveway wanting to unload before all the T&C's are crossed. To make it worse if for some reason it has been a bit of a tussle getting to closing the seller will firmly say to bad you can sleep in the street tonight. Leaving a buyer crying about the cost (opps chances are it was your lender who messed up) of waiting an extra day or over the weekend.
I'm doing prep work on possible delays for a current client's sale and upleg purchase. We are planning for a smooth transition but as we all know "anything can happen in a real estate deal" so it's important to have a plan B in place.
I'll bet this will be re-blogged more than a few times! Great reminder for agents and consumers.
I always have Plan B and most times I even have Plan C lined up ready to go.
I burst out laughing, SarahGray, when I read your “…what Plan B is NOT,” remarks. They are so true. It’s my experience that some buyers have the mindset that the moment the sellers sign their offer agreement that the buyers now own the home. They don’t! …and it seems that buyers sometimes have a difficult time understanding that. I enjoyed your post.
SarahGray.... (my little) Lamm....
All veterans know that this busness is famous for giving birth to "PLAN B'S. Good post to support a "staple" in the Real Estate industry....thank you
Good conversation to have with the buyer! Happens more times than we would like.
Such great advice! I hope every buyer who is closing shortly reads your blog!
Those Plan B's are so important to have in place. They seem even more important these days than years past.
It is truly the pits when there are several Closings all dependent on the first one in the chain Closing so they can Close.
Sue of Robin and Sue
Ahhhh....yes, a plan B. I sure do appreciate learning these lessons without having to go through them myself (or with my clients). Thanks!!
I had a situation like this last year and it was a mess. Everyone is counting on closing and then something happens. Better to plan ahead of time for this scenario.
Sarah - This is a terrific post concept, and so clearly written. I might need to write something similar and use it for my buyer clients.
Plan B: pack a sleeping bag and sleep in the moving truck.
Very good advice for all buyers in your post.
wise words! I once had clients that had to spend the night at my house when their closing did not take place. Fortunately, they were delightful folks and my house was big enough for all of us.
Plan B is a great idea.
I went to retrieve my lock box two days before closing to find the buyers moving in. Their agent had taken the key out of my lock box and gave it to them. Needless to say I was not a happy camper. I'll blog about that one. Great post.
SarahGray the situation you detailed keeps mortgage originators up at night. Throw in the one document the lender needs is packed in the moving truck and you can have a real problem. You are doing a great job advising your clients about this. As Yogi Berra said "it aint over till it's over".
I never give out keys or let them move in early. its a fast way to unwind a deal.
Good information, and as many of your comments state, ever so timely. Congratulation on being feature.
SarahGray - we have all been there and done that but we learn from our past too. I had one of my first deals closing on a friday and needless to say I ran into the truck staying two extra nights. Not out of my pocket but guess what? I was the bad guy because I would not give up the keys.
Cynthia, I would be livid if I had a buyers agent do that on my sellers home. Oh my.....
Also in my area I have never had to deal with an attorney at closing but I can imagine everyone waiting and waiting on the lenders docs wherever they are to land.
SarahGray, this is why it is always a good idea to negotiate "3DAC" three days after closing in a contract. It protects both Seller and Buyer, so if there are any hiccups, nobody is on the pavement with a moving van breathing down their necks. Excellent advice to Sellers and Buyers in the Raleigh NC area.
To start with, I try to NEVER close on Monday or Friday. That gets rid of a lot of problems. People usually plan on moving over the weekend, even if they are closing on Wednesday, so that helps.
Sarah, I'm glad you wrote this post. 90% of my closing never happen when they are suppose to and even when they do, I'm totally surprised.
There are so many factors that have to line up to complete a real estate transaction, it's a wonder there is not some type of "Realtor Ritual" that we should do to make sure that the closings happen.
I agree that a Plan B is definitely necessary. I've seen buyers have to spend the night in a model home with their moving van in the builder's parking lot. Things happen...things that we can't always control.
Definitely good to have a plan B -- and the world does not always go according to plans.
Hi Sarah~ Love this post. Last minute things happen and can't always be prevented. As a matter of fact, things can mess up plans at any time! Buyers, sellers and their agents always have to be quick on their feet!
Twice I have allowed Buyers to possess before Closing (Florida).
Even with signed written agreements on "standard" forms, BOTH turned into nightmares.
The first one NEVER closed. The second - the A/C compressor mysteriously failed during the 2 or 3 day interval - there was no warranty in effect.
I advise against Occupy Prior to Closing.
Love the post, and have bookmarked it for the future. Hey , you just never know what might happen.
Patricia/Seacoast NH
Excellent post...today it seems no matter how hard we try things happen, I too advise buyers to have a plan B, but most times it falls on deaf ears!
Plan B is usually developed in the 11th hour! Great post and so very true. With the market being what it is, and the lenders so very cautious today, you have to have a "Plan B"!
Unfortunatley most buyers do not listen when the need for a back-up plan is discussed. Excitement creates momentary deafness :) I have started having this conversation a second time (or sometimes third time if they talk about visiting relatives helping them with the move, or non-refundable moving truck deposits) as we get closer to closing - just to make sure that they have heard me!
SarahGray, loved your post! ...and the first one I will re-blog.
I had this happen (again) last month and the "seasoned" listing agent flipped out, like this never happens...got the selller ready to pull the plug because there MUST be something wrong with the loan.
Breath in, breathe out...
Eve in Orlando
SarahGray you've written a very informational post for buyers & realtors...most back up plans are just 'freaking' out. Not closing on Friday on ones with a foreclosure or short sale has always been a must for me...
SarahGray With 34 years under my real estate belt that is one of the first cautions I discuss as we are writing the offer.
Great post! I always advise my sellers and buyers to have a back-up plan.
Hit up relatives for temporary quarters. Get a storage facility for a month. Pay the moving company to store your belongings on the truck for a day or two. Oh, that's the operative word: Pay. People don't want to have to pay to have their belongings in temporary storage. It always comes down to the money required. Many people would rather chance it, and they end up spending more money than if that had made a plan. It's a shame.
SarahGray, this is true, that is why we try our best to NOT close on a Friday, then they might be in a hotel over the weekend and not one day.
We discussed at our board meeting starting to add a clause to give the sellers 3 or 4 days to move. We have always had possession on the day of closing and with packages being late, this could be better for both parties.
We shall see....
Or... AGENT COULD COUNSEL HIS CLIENT TO ASSERT HIS RIGHT TO RECEIVE AN ADVANCE COPY OF THE HUD-1 . I think it is a pretty safe bet that if the HUD-1 is prepared the day before closing, then everything else is ready and the settlement will happen on time. If HUD-1 is not ready, at least everybody has a day's notice to adjust their plans.
Dear Consumer, thanks for stopping to comment! Would that it was that simple. Unfortunately in this lending environment the consumers right to an advance copy of the HUD-1 is often met merely hours before the scheduled closing. Your agent should be ready to review it with you whenever it arrives and closing should not take place until you have had that opportunity. Lenders today are conducting last minute checks and reverifications of information, which they have previously collected from the consumer, in order to protect their own interest. When this happens depends on the lender, the underwriters they use and can frequently be compromised by a buyer who makes a last minute large purchase, like furniture for the new home, or one of the buyers quits a job or sells a business which was used to qualify for the loan.
I agree that your surmise regarding having a HUD-1 a full day before is a safe bet for a smooth closing, it simply doesn't happen often and influencing a underwriter who is doing the last minute processing on a stack of loans is not as simple as asserting your rights.
In my last 25 closings I have had two delays. One was my buyer and one was my listing. There were circumstances which were well beyond the control or influence of agent, lender or attorney. In the case of my buyer it was beyond their control as well. Most often these days I am very happy if we get a HUD-1 the night before. I do not spend my time simply hoping for one but am actively engaged with the lender rep throughout the entire process. It is for this reason that I usually know how things are progressing. As I said in the post though, stuff happens.
It would be nice if the world worked the way it was planned but anyone in real estate for any length of time understands that flexibility and patience are the keys to success. I stand by my suggestion that having a Plan B is in the best interest of the consumer and it is better to have that plan in place BEFORE you are only getting one days notice!
Reblogging!!! So important a reminder! Thanks for sharing!
I just had one delayed by 10 days.... Thankfully the sellers are all settled in their new home. But their bridge loan is tacking fees on like crazy. And the buyers are sitting in a moving truck, with nothing but an air mattress in their old home, because the buyers of Their house were using BOA. Tomorrow we close and everyone can finally get settled in. But whew, what a mess!! We had a HUD... unfortunately, the closing down the line from us did not.