The typical time to close a simple real restate home sale transaction in DFW is getting ready to go from approximately thirty days to forty-five days. That got your attention, didn’t it?
That’s the bottom line to the new regulations that will take effect on Saturday, October 3, 2015. The new regulations were adopted in 2010 as part of the Dodd-Frank act to protect consumers from predatory lending practices.
The changes apply to lending practices and will affect Realtors® indirectly, yet profoundly. First, lenders must provide a Loan Estimate within three days of the buyer making the loan application. The consumer then has ten days to commit to proceed with the loan transaction. No fees can be levied before the buyer elects to proceed, other than the credit application fee.
This means that appraisals cannot be ordered until the buyer commits to proceed. It could be up to three weeks from the date of contract until the appraisal is ordered. If the appraisal changes the loan-to-value ratio then the Loan Estimate must be revised within three days, starting the waiting period all over again.
The next big change is that the final Loan Estimate has to get to the buyer at least seven days prior to the closing. And the Closing Disclosure must be made a minimum of three days before closing. The lender is liable to pay variances if there are any at closing. If variances are discovered before closing the lender may cause delays to avoid having to pay penalties.
The Closing Disclosure must be redone if one of these three situations apply:
- APR changes more than 1/8%
- Change in loan product
- Loan Pre-payment penalty is added
If the Closing Disclosure has to be re-done, the three-day waiting period is reset.
You can see how it’s more important than ever to work with reputable lenders and keep open communications between the buyers and lenders and yourself. Having lenders you trust, and buyers that trust you, has never been more important.
As real estate professionals, we must develop scripts that help us manage clients’ expectations. Gone are the days when we can squeak through a loan right quick with an adept loan officer. We must educate clients on the new process, preferably at the Buyer Consultation stage.
These new timelines also affect the probability of back-to-back closings going smoothly, at least until lenders have adjusted to the new procedures. Building time in, where possible, will create more ease for transactions.
And say good-bye to last-minute negotiations. Do the final walk-through early. We need to get transactions finalized as early as possible, so that at least our end of the transaction is clean.
I see great opportunity for KW agents to be leaders in our industry and show our clients why having a real estate agent who advocates for their transaction is invaluable.
I would encourage all agents to look at the following resources to become familiar with the new forms, and attend several classes between now and October 3st, as the implementation process gets worked out with the deadline approaching.