For years, I taught my clients about the same old real estate freak-outs and how to manage them. Time to write an offer? That’s a freak-out moment for many. Get a contract accepted?
The buyer’s freaking out about having paid too much, while the seller’s sitting at home having the reverse freak-out that maybe they took too little. Contingency removal time? There’s another freak-out. The normal stuff — all to be expected.
Over the last two years, though, we’ve seen new freak-out after new freak-out — panicky breath-holding over whether a loan will get signed off, whether an appraisal will come in at the purchase price, or whether a burdensome loan will be modified or foreclosed on.
Over the first few iterations of the first-time homebuyer tax credit, there wasn’t much of a freak-out about missing out, because months before the expiration date it was always extended.
But on this most recent go-round, with most industry commentators warning that the credit would likely not be extended once again, there was a small contingent of buyers who freaked out about getting into contract by that April 30 deadline, to catch the credit while they could.
(Small, methinks, because so many of the buyers who were desperately seeking the tax credit had already gotten it, sometime in the last couple of years.)
With April 30 past, most of us in the industry thought we’d seen the last of the tax credit-driven freaking out. Then, homebuyers everywhere said, "Not so fast, buddy boys (and buddy girls)." You may recall that the latest version of the tax credit required that buyers be in contract by April 30.
But to collect the credit, you have until June 30 to close escrow on a transaction that was in contract by April 30.
Hence, the latest real estate freak-out of homebuyers across the country: What if something happens, and the transaction falls out of escrow or closes after June 30?!
Unfortunately, it’s possible. Quite possible, in fact. For example, Nevada Title recently reported that the average short sale takes more than eight months to close escrow, from the time it comes onto the market, with the average bank-owned property taking nearly five months.
Further, delays due to unresponsive (or slow-to-respond) bank sellers or sellers’ banks are responsible for nearly 50 percent of transactions that fail — meaning the ones that don’t close escrow at all.
Additionally, appraisal problems like the home failing to appraise at the purchase price, or the appraisal calling out condition problems that are unacceptable to the lender and unresolvable between buyer and seller, can also throw a monkey wrench into the deal — or even kill it.
Inspections can turn up nasty surprises that make the home a nonstarter. Or your lender might find a problem with your qualifications — or the home’s — for the loan, late in the game.
So, what’s a buyer to do? Well, first, stop freaking out. It does nothing to help close the deal, and I’m convinced that brokers, inspectors, mortgage professionals, sellers and everyone else you need to pull together to get your deal closed all operate less effectively under your haranguing and constant calls and e-mails than they would otherwise.
In fact, if your mortgage pro and real estate representative both know that you need to close in a certain time to get the credit, you should know that they have the incentive of closing because they don’t actually get paid for all their work unless and until escrow closes.
Those motivations combined, plus the fact that they’d really love to make you happy, will push them to do what they can to get your deal closed in a timely manner — something they would have done even if the credit didn’t hang in the balance.
Second, a credit-hungry buyer should give themselves a two-part reality check. Part I: The credit is meaty — up to $8,000 — enough to start replenishing a downpayment-drained savings account or pay for some much-needed home repairs. But it’s certainly not worth buying a home you wouldn’t buy in the absence of the credit.
Reality check Part II: Sometimes, deals fall out of escrow, and there’s simply nothing that anyone can do about it. Your real estate and mortgage folks, and your (ostensibly motivated) seller will all do what they can to make it happen. But it may not. And the sky will not fall. The world will not end.
The energy you’re putting into stressing about the timeline is better spent reviewing your inspection reports and mortgage documents with a fine-toothed comb.
Well, make that a three-part reality check. Part III? Most transactions do close. Most still close in 60 days or less, especially if we’re talking about nondistressed property sales, which still comprise the majority of home sales.
So show up, sign and return documents promptly, attend your inspections, and provide what your real estate agent, mortgage broker and lender request — when they request it. Make sure everyone is aware that you are trying to close in time for the credit, but don’t harp on it. And let the chips fall where they may. Oh yeah — and stop freaking out.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.
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