As the owner of a mortgage bank, the most common complaint I hear about buying a house is the excessive amount of documentation required to obtain mortgage financing. The new laws governing mortgages and money laundering seem endless and the sheer volume of the paperwork needlessly slows the process. Let’s discuss something the Real Estate industry can do locally to promote on-time closings.
Abstract & Survey Delays
Delay in obtaining the abstract and survey is the greatest factor in postponed closings. The survey map shows the boundaries of your property and the abstract is the chronological history of a property’s ownership. Customarily, attorneys representing the Seller do not start the process of ordering the survey and abstract until the Buyer has obtained mortgage financing. The logic is simple: if the Buyer fails to obtain a mortgage, the transaction fails, resulting in the seller incurring the expenses for abstract and survey that they will never recoup. Conservative Seller’s attorneys, believing they are acting in their clients’ interest, delay ordering the survey and abstract. However, that delay can create bigger, more expensive complications for both clients. If the Buyer’s rate lock expires due to the delay the Seller may be charged a rate lock extension fee. In turn, the Buyer may need to reschedule movers or even find temporary housing.
The solution to the problem is an abstract and survey guarantee from the mortgage lender. The Lender you work with to obtain mortgage pre-qualification, should provide a guarantee to the Seller’s attorney that the survey and abstract can be ordered at the time of contract without monetary risk to the Seller. In essence, guaranteeing the mortgage financing or guaranteeing that if the financing fails, the Seller’s abstract and survey charges will be paid. Many attorneys now insert language in the attorney approval providing that same guarantee on behalf of the Lender.
How You Can Prevent It
Ask your agent if they have ever had a closing delayed because of a late-ordered abstract or survey. I would be surprised if you could find anyone who has not. Working with a Lender that guarantees the cost of the abstract and survey will avoid the most common cause of delay in residential real estate closings.
-Mike Donoghue, President