Often buyers and sellers are surprised by some of the issues that can pop up within the last few days before closing. Sudden difficulties when you feel like you’re right at the finish line can make what was otherwise a smooth transaction feel like a nightmare. On the Jean Scott Team, we pride ourselves in doing everything we can to prepare our clients for any possible scenario – one of the hurdles most often unexpected is funding.
Many people don’t realize that getting documents signed is not the final step in closing. Generally, keys cannot be released until “funding” has taken place. Funding occurs after documents are signed, and is essentially the exchanging of money. Understandably, sellers usually will not and title companies cannot release keys to the buyer until money has been transferred. In a normal transaction, this should take place within an hour or so after documents have been signed, but there are a few exceptions.
One hurdle to funding can be obtaining funding authorization from the buyer’s lender. Once all closing documents have been signed, the title company sends those executed documents to the lender. The lender reviews the documents to verify that they have all been executed correctly. If they have, the lender then issues a “funding number” to title. This gives title permission to release all funds that they had been holding (usually the buyer’s down payment and closing costs and the lender’s portion of the purchase price) to the appropriate party (usually the seller).
In a smooth closing, it’s that simple. However, occasionally issues pop up that delay this process. The most common scenario is simply overwhelmed title companies or lenders. The end of the month is an especially busy time for both parties – if you are closing at the end of the month, expect a delay of a few hours to even one business day. In this case, however, always remember that you are the client, and when it comes right down to it, it is the responsibility of the title company and the lender to serve YOU. As a buyer, you can call your lender after documents are signed and urge them to complete the funding process as quickly as possible. As a seller, you can follow-up with the title company to make sure they’re on top of your closing. We can and do make these phone calls, as well, but a request directly from the client always holds more weight, so we encourage you to get involved with these parties as well if you feel it is necessary.
REOs often cause another issue with funding. REO stands for Real Estate Owned; this means that the property was taken by the bank in foreclosure and is now owned by the bank. When a bank is the seller in a transaction, they often have very specific procedures that must be followed. For many, they must have original closing documents in their possession before they will authorize funding. This means that after closing, title must overnight the documents to them. Others may not require that, but if their title company is far away, the buyers must do a mobile closing in their area and then documents still have to be overnighted back to the title company. We typically try to prepare buyers of REO properties for up to a three day delay in funding and receiving their keys.
When choosing a home, it is important to consider your moving circumstances. If you’re purchasing a REO but need to move in the day documents are signed, let your Realtor® know as early in the process as possible so that they can do their best to make arrangements for you. They can also make you aware of any possible delays so that you can have a plan of action in place. Always be open with your realtor about your expectations, even if they may seem small or obvious – it’s their job to do their best to make sure that your closing experience meets those expectations.
– by Laci Burkes, Office and Transaction Manager for the Jean Scott Team.