Last-Minute Closing Issues: Fix at Closing or Delay?

Why Closing on Schedule Matters

Michelle Earle, Manager and Closing Agent at South Oak Title and Closing in Moody, learned early in her career to protect a scheduled closing date whenever possible. “I was taught from the very beginning not to delay a closing, so I do everything I possibly can to close on time,” she explains.

By the time the lender is clear to close and the closing is scheduled, any last-minute changes affect several people and processes, including:

• The lender’s closing package: The lender prepares the loan documents for the scheduled closing date, and some amounts, such as prepaid interest, are calculated based on that date. When the date moves, the lender has to update the documents and approve the closing again. A longer delay can also cause the buyer's interest rate lock to expire.
• The seller’s payoff amount: Interest on the seller's existing loan continues to accrue until the loan is paid off, so a new closing date means a new payoff amount.
• Back-to-back transactions: Sellers often use their proceeds to buy their next home the same day or shortly after. When one closing moves, the next closing may need to move with it, creating a domino effect of delays.
• Moving and personal plans: Buyers and sellers schedule movers and furniture deliveries, plan around lease end dates, and take time off work. Any of these arrangements can be difficult or costly to change.

Last-minute delays are rarely caused by title issues. “The title search happens well before closing. We find and resolve any title issues before closing can be scheduled,” Earle says. Issues that come up in the days leading up to closing are more likely to involve the property's condition, such as damage or an unfinished repair discovered during the walkthrough. Depending on what that issue affects, the parties can often resolve it without delaying closing.

Minor Issues Before Closing Day

Minor issues typically involve something that needs to be completed, returned, removed, or cleaned up. Because these details don't affect the home's structure or appraised value, they don't change the property the buyer agreed to purchase. Examples of minor issues include a seller taking a refrigerator that was supposed to stay with the house or furniture damaging a wall during move-out.

As a neutral third party, the title company can explain available options for resolution, but it won’t recommend one outcome over another. “There are very few issues we can’t work through when the buyers, sellers, and agents are talking to one another,” Earle says. “Often, they’ve settled the matter before they reach the closing table, and they just need us to prepare an agreement.” Both parties’ agents can usually work out an agreement with input from their clients, and the closer will put that agreement in writing.

The parties can also agree to hold funds in escrow until the work is done. In that case, the closer prepares an escrow agreement that the buyer and seller both sign, stating the amount being held and a deadline for completing the work soon after closing. South Oak has moved away from holding funds in escrow, since it can create complications for the lender. The closing team generally reserves this option for small jobs that can't be finished before closing, such as touch-up paint or clearing a fallen limb from the yard. For most minor issues, a signed agreement between the buyer and seller is enough to keep the closing on schedule.

Major Issues That Will Require a Closing Delay

Some issues must be fully resolved before a closing can take place. A major issue changes the property the buyer agreed to purchase, usually by affecting the home's structure or its appraised value. Because these issues also affect what the lender is financing, they can't be settled with a signed agreement at the closing table the way a minor issue can.

For example, the appraisal tells the lender what the home is worth as security for the loan, and when the appraiser notes a required repair, the lender makes completing that repair a condition of the loan. The closing can't move forward until the work is done and the appraiser returns to confirm it, which depends on both the contractor's schedule and the appraiser's availability.

Larger repairs and damage to the home also need to be addressed before closing. A nick in the wall can be touched up after closing, but a failing deck is a different matter. "If someone steps out onto the back deck and it gives way, that's an entirely different issue," Earle explains. A repair of that size is better finished before closing, even if the date has to move.

Similarly, a storm the night before closing may or may not delay the closing, depending on the damage it causes. A branch that falls in the yard or lands on the house without causing structural damage won’t usually delay a closing. However, the parties may need to sign documents at closing confirming the property's condition. In contrast, a fallen branch that creates a hole in the roof is a major issue. After a severe storm, a lender may also require confirmation that the property wasn’t damaged before allowing the closing to proceed.

Situations like these are uncommon. Most major issues with the property are identified during the inspection or appraisal and addressed early in the transaction. Many lenders also require certain documents, such as termite reports, to be submitted and reviewed before they'll allow a closing to be scheduled.

When a major issue does delay a closing, the timeline usually depends on the lender, the appraiser, or the contractor completing the repair. South Oak doesn't order inspections or appraisals, but the closing team stays in contact with the agents while the issue is resolved and follows up with vendors when a document is needed to close.

Practical Steps to Turn Potential Delays Into Fixes

Most last-minute issues are easier to resolve when they're identified early and the parties have a plan for handling them. These steps can help keep the closing on schedule.

• Have sellers communicate their plans before closing day. Sellers may make move-out decisions the buyer hasn't heard about, such as items they plan to take or leave behind. These decisions are easier to settle before the walkthrough than during it.
• Complete negotiated repairs before the walkthrough. When the buyer and seller agree that repairs will be finished before closing, follow up on the progress well ahead of the walkthrough. If a larger job, such as a roof repair, is still unfinished by closing day, it can't be resolved with a signed agreement and will likely delay the closing.
• Document walkthrough findings and agree on a solution before closing. When the walkthrough turns up an issue, talk it through with the other side and write down what everyone agrees to. The closer then only needs to put the agreement in writing, and the parties can focus on signing instead of negotiating at the table.
• Raise issues as early as possible. Problems are much easier to handle before everyone is at the closing table, and more time usually means more options for resolving them. South Oak's team won't recommend what the buyer and seller should decide, but it can explain what's required to close and prepare the documents for whatever the parties agree to.

Most issues that come up in the final days before closing can be worked out when the buyer, seller, and agents communicate early and agree on a clear plan. Knowing the difference between a minor issue and a major one helps everyone set the right expectations, whether that means signing an agreement at the table or giving a larger repair the time it needs. With good planning, many last-minute issues can be resolved without affecting your closing date or your client's experience.

South Oak Title and Closing works with agents, lenders, and their clients across the Southeast to make each closing as smooth as possible from start to finish. Contact your local South Oak Title and Closing office with questions, or order a title and schedule a closing today.