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August 1 2015 Getting from Contract to Close in home buying is changing. 

**************UPDATE  1 OCTOBER 2015**************

Have you been hearing the buzz about Real Estate process changes regarding financing coming to market on August 1 2015?  No? Yes?

Best guess is if you have not heard about the changes- you may have some curiosity or questions.  If you have heard about the changes – you may have some questions.

Let’s face it- much of what is changing has to do with what goes on behind the curtain and ‘doesn’t seem’ to affect you, but I can assure you it will have an affect upon your home purchase and home selling plans.  So let’s look at bits and pieces of the changes over the next 60 days…….(remember that phrase- …the next 60 days… as we move along- it will come to hold deep meaning in the end- I promise!) 

This is Part 3 in a series and today we discuss how the ‘walk through’ process may change.

Every agent is a bit different in how they handle walk through with their clients but a typical Walk Through is set up to go as follows:  Home buyer is set to close on the home in the next 24 hours, or next 4 hours, and the buyer’s agent will meet with the home buyers at the home to ‘walk through’ the property to assess if it in fact is in compliance with the agreements of the contract.  At this point the buyers and their agent are walking through to check for any damage (possibly occurred upon move out or during the time period from contract to now), property that was part of the contract is still at the property i.e. Window treatments, Appliances, Sheds, Whatever was part of the contract needs to be onsite during the walk through- or there is a stop to the process while the parties work to resolve the issue.

Now how or why could this change?  Seems like a simple process.  This should not effect the financing part of the purchase and/or the timing of closing- should it?

Well it could as the process demands that ALL be completed prior to the assembling of numbers and the delivery to the buyer client.  To gain perspective let’s look at how things are done today.

After the offer is agreed to and a contract is formed one of the often first items done is an Inspection.  During the inspection occasionally there will be a few items that may need to be addressed.  Or items the buyer ‘requires’ to be addressed prior to continuing with the salepurchase.

A period of negotiation will begin.  A repair addendum will be created and an agreement to have specific repairs done to the property will be agreed upon by both parties.   Often, as is the case, a seller may plan to have repairs done and then pay the provider out of the closing settlement. (which in the current model could be 15-20 days from the repair date).  This is often agreeable to all parties, as the goal is to have a qualified professional do the repairs, get paid and close on the home.  Let’s look at another scenario- thanks to this past winter many of us can relate to this scenario.  The inspector has determined that the home must have a new roof- and all parties have agreed to this fix prior to close.  Well all parties except Mother Nature- who has decided to keep temps close to ZERO and snowfall close to 1FOOT!!!  Now what- well TODAY the parties would create a Repair Escrow at closing to allow for the roof to be repaired- post-closing when the conditions were more favorable for such work.

In the new world these two simple and common examples would become a bit more troubling for both the home buyer and the purchaser.  The new delivery time frames we discussed in Part 1 of this series would change the time frame from repair to payment for the professional who worked on the home.  In many cases pushing his potential payment out 30+ days.

In the first scenario the professional may not be agreeable to these new ‘terms of business’ and as such may ask for payment at time of completion of work.  Reasonable.  However, in many seller situation, especially where there are repairs of substantial cost, there may not be ‘liquid cash’ available to pay for these repairs UNTIL closing.  Now what?

In the second scenario the banks have indicated repair escrows will not be permitted.  If the Lender indicates No Escrows Permitted- then there is no Escrow Permitted.  Now what?

For the sake of moving to Part 3 in this series- The Walk Through- let’s pretend the repairs negotiated were minor in scope and minimal in money.  The repairs were done within 7-10 days and the buyer was in agreement that this was an allowable amount of time to get such done.

Then begins the process known as Walk Through…. Excited right- it is almost closing day!   Not so fast- this is the FIRST walk through- see this new RESPA TILA process will make it more likely, that in cases where a buyer is requesting seller repairs and seller has agreed to perform requested repairs then multiple walk through dates will become the norm in order to adhere to the timelines and insure no hiccups in the process.  Hiccups could prove expensive when dealing with rising rates- and as we mentioned in Part 1- they can, in some instances, mean a buyer can no longer fulfill the purchase contract and the purchase will come to a grinding halt.

 

Dawn 2015 Biz Headshot If after hearing about the changes you are still in the market for a home – or needing to list and sell your home- then let’s talk today. Call me, Dawn, today at Heritage Properties spc and let’s start the journey toward making ‘YOUR home ownership dreams a reality!”

860-575-5001 cell/text

860-739-4455 ext 33 office

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