How to Handle Surprises on Closing Day

Common Closing Day Surprises

As a realtor, you know that even the smoothest transactions can hit unexpected snags on closing day. These surprises typically fall into four main categories: problems with the house itself, issues with funding or financing, documentation challenges, and missing people. By familiarizing yourself with these common closing day hurdles and developing strategies to overcome them, you'll be better equipped to guide your clients through any last-minute complications and keep the deal on track.

Problems with the house or property

Some of the most challenging last-minute closing day issues are those with the property itself, which can emerge at the eleventh hour and threaten to derail even the smoothest transactions.

Picture this: Your buyers arrive for the final walkthrough, excited to see their soon-to-be home one last time. But as they enter, their smiles fade. With the seller's furniture gone, they discover water damage hidden beneath a strategically placed rug or a gaping hole in the wall once concealed by artwork.

Or perhaps a recent storm has caused unexpected damage to the roof, unnoticed since the initial inspection. Worse still, you arrive on closing day to find the sellers haven't fully vacated the property, leaving a garage full of belongings and a living room cluttered with boxes.

These scenarios aren’t just inconveniences: they can significantly impact the closing process. Most contracts stipulate the condition the house should be in at closing. Deviations from this can lead to contract disputes. Unexpected issues with the house may also require additional funds or changes to loan terms, leading to time-consuming negotiations. And a partially vacated home creates immediate occupancy issues that can delay the transfer of ownership.

So how can you, as a realtor, handle these curveballs effectively? The key lies in a two-pronged approach: prevention and swift response.

Prevention is your first line of defense. Throughout the sale process, document everything meticulously. Stay informed about local weather conditions that might affect the property. For example, if you hear about flooding in the area, don't hesitate to check in on the house. After inspections, follow up diligently on any required repairs before the final walkthrough.

When issues do arise, your response should be quick and strategic. Address problems immediately upon discovery. Don’t wait until closing day to bring up needed repairs or issues with the home if you don’t have to. It's also helpful to know your options, such as repair escrows or amended contracts. Having creative solutions ready, like short-term rentback agreements for move-out issues, may help you rescue the deal.

When Financing Falls Through

Even with careful planning and preparation, issues with financing can arise - even at the last moment - threatening to topple the entire deal. While financing seems like it should be a straightforward math problem, a number of financial issues can threaten a deal:

• A loan that falls through due to a last-minute credit score change, perhaps from a recent job loss or an ill-timed large purchase
• The buyer realizes that they're short on funds, discovering that the full closing costs are higher than they expected
• Funds for closing are in the wrong form, such as a personal check

These financial hiccups can bring the entire transaction to a screeching halt. Without proper financing or sufficient funds, the purchase simply cannot proceed, potentially unraveling months of hard work and leaving both buyer and seller in limbo.

Education is a key component in preventing these last-minute financial issues. Make sure to educate your clients early and often about financial dos and don’ts while waiting to close and verify that they understand their full financial obligations. For example, buyers may be caught off guard by closing costs such as appraisal fees, attorney fees, title insurance, and prepaids. It may also be helpful to recommend that clients have a buffer fund for unexpected expenses such as mortgage points or other administrative or processing fees.

If financial issues do arise on closing day, remember that while you can't fix your client's financial situation, you can play a crucial role in finding solutions. Act as a liaison, communicating clearly and quickly between all parties. Your calm demeanor and problem-solving skills can help keep negotiations on track and explore alternative options, whether that's a last-minute loan from a family member or a seller concession.

Issues with Documents or Identification

While paperwork may seem mundane, it forms the legal backbone of every real estate transaction. Unfortunately, a single missing document or an expired ID can bring the closing to a halt. Innocent mistakes can happen, such as a driver’s license that was left in another wallet or a form of identification that expired just three days before closing.

In other cases, it isn’t personal identification that’s missing, but rather important property-related documents like surveys or termite inspection reports. If a document is required by the purchase agreement but is not part of the closing package, the transaction cannot proceed. Or maybe a party arrives with a Power of Attorney believing that all of the documentation is in place, but this POA has not been approved by the title company or the lender.

These documentation issues aren’t mere inconveniences. Many documents are legally required to transfer property ownership, and mortgage lenders have stringent documentation requirements that must be met before releasing funds. Proper identification is crucial for notarization and fraud prevention, serving as a safeguard for all parties involved.

To avoid missing documentation on closing day, consider implementing these preventive measures:

• Create a comprehensive document checklist so that clients arrive with everything they need for closing
  
• Verify expiration dates on all time-sensitive documents
  
• Educate clients about required documents well in advance
  

In spite of your best efforts, issues with documents and identification can still arise. When they do, quick thinking and knowledge of alternatives can save the day. Know which forms of ID are acceptable substitutes and understand the specific requirements for power of attorney documents in real estate transactions.

Missing People

The documents may be ready and the funds may be in place, but you can’t close a real estate transaction without the people. Missing participants are one of the most unpredictable - and frustrating - closing day scenarios.

In Alabama, where marital property laws are strict, a missing spouse can be particularly problematic. Unless there's a final divorce decree, both spouses holding title must be present at closing. This requirement can lead to tense situations, especially in ongoing divorce cases.

But spouses aren't the only potential no-shows. Buyers or sellers might be stuck in traffic, dealing with a sudden emergency, or simply at the wrong location. While these reasons might seem trivial, their impact is anything but.

Many closing documents require in-person signatures or notarization. In Alabama, remote online notarization isn’t yet an option for real estate transactions. If all necessary parties can't appear and sign the documents legally, the closing grinds to a halt. It's not just an inconvenience; it's a legal roadblock.

To avoid any last-minute disappearing acts, confirm attendance early and often. Flexible closing options, such as mail away closings and split closings, are available if needed – but the title company needs to know about this need before closing day. Coordinate schedules as needed, especially for divorced or separating couples. And always make sure to provide reminders and clear, detailed driving directions to all parties.

If someone does go missing on closing day, swift action is crucial. Reach out to the absent parties immediately to understand the situation. If it's a simple mix-up, like going to the wrong office, see if a split closing is possible. For more complex issues, you may need to negotiate flexibility with all parties.

How to Handle Any Surprise on Closing Day

While meticulous planning and preparation are crucial in real estate transactions, it’s impossible to anticipate every twist and turn. The key to navigating any closing day surprise lies not in perfect prediction, but in your approach to unexpected challenges.

First and foremost, maintain clear, proactive communication throughout the entire process. Whether you're relaying instructions to your client, providing information to the title company, or coordinating with other parties, prompt and transparent communication can prevent many issues and help resolve those that do arise.

Secondly, bring a positive, problem-solving attitude to every deal. When surprises occur, don't shut down. Remember, you're the professional your clients rely on not just for solutions, but also for cues on how to react. Your calm, confident approach can turn a potential crisis into a manageable bump in the road.

Lastly, always partner with a trusted, professional title and closing company. Their expertise and established processes can minimize delays and provide invaluable support when facing unexpected challenges.

At South Oak Title and Closing, we love partnering with realtors, lenders, and their clients to ensure that closing day is straightforward and stress-free. But even if closing day features surprises, we’re here for you with solutions and support. Contact us for more information about our approach to real estate closings, or order a title and schedule a closing today.