How Long Does it Take to Close on a New Home Purchase?
by Evan Vanderwey on 17/07/10 at 2:17 pm
Often, the process takes only three to four weeks. That said, we have to acknowledge that today there are factors that could cause the process to take much longer.
Let’s look at recent proof for this reality.
Home buyers who accepted a deal by April 30th had 60 days to close their deals by June 30th to qualify them for the home-buyer stimulus credit. If deals can be closed in three to four weeks, then why did Congress extend the home-buyer-credit closing date past the 60th day? There are a number of factors that made it necessary…
~More offers on homes were written and accepted the week of April 30th than maybe any time in the history of selling real estate. Homes are moving faster even today than they were last year. Homes are a great deal, more people are buying. Which means the pipeline got full and slow very quickly.
~Then, in June, interest rates moved down one more notch to a level that is lower that at any time in relevant history. Even though home values are lower, this caused more loan applications to be submitted by loan officers for their clients than has recently been seen. Both purchase loans and re-finance applications accounted for the increase.
~Remember too, that there are fewer lending institutions and conduits today than there were three years ago. So in an overall sense, the pipeline is narrower.
~Lenders are making the approval process more difficult by asking for more documentation. This holds up the process of obtaining an approval and getting your deal to the closing table.
~Banks are the sellers (or in charge of short sales) in likely half of today’s purchase transactions. These banks contribute to slow closings because they have departments and hoops that need to be jumped through before deals can close.
~The above is not an exhaustive list. If your deal was held up, leave a comment and tell us why. The stories are varied and weird.
Add it all up and, simply speaking, you have more files and a slower process. What was thought to be enough time to get deals closed, turned out not to be for hundreds of thousands of homebuyers – homebuyers who had their accepted offer completed by April 30.
So, you negotiated your deal on April 30 and paid a price that was likely inflated a little because you were convinced you would get the tax credit. Then for reasons (above) that were beyond your control, you did not close by June 30th.
Politicians would not have been able to live that one down. They voted to extend the closing date. This allowed those who made the purchase assuming they would get the credit to actually get it. The credit itself was not extended it was just given a little more integrity.
Closing in one or two months is most often do-able, but in today’s market, as we saw by the necessity of the extension, it’s just not always enough time.
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