Home Mortgage Alliance Corporation (HMAC)

Closing day: Prepare for the journey

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Published Date 2/15/2024

It’s not surprising buying a home is likened to childbirth. First, there is the joy of finding out about your new path in life (identifying your new home), preparing yourself for the birth (down payment, qualifying for the loan, packing your stuff), closing time (the pain of childbirth), and realizing you’re now a parent (post-move-in exhilaration).

Realtor.com’s Lisa Kaplan Gordon admits a real estate closing is an anxiety-inducing time, even if it goes smoothly. “Add something unexpected and it will throw you for a loop,” she says.

She describes how thrilled she was when her offer was accepted on a tear-down lot in McLean, VA. “The perfect place to build my own ‘Downton Abbey’–style manor. And the deal went forward without a hitch—that is, until closing day.”

After taking her seat at the closing table on the big day, Gordon’s real estate agent sheepishly handed her a set of 40-year-old covenants that restricted what she could build on the site. “Looking back, I know that I should have smiled politely at the six people gathered and suggested we reconvene later – after I’d studied this giant wrench in my plans. But I didn’t want to inconvenience everyone, so I closed the deal,” she said.

That, she said, was a mistake. “Even though those covenants didn’t derail my dream home’s construction, they caused me constant anxiety”.

These types of revelations are not just a concern for those building a home from scratch, however. Closing day is daunting for many buyers, and when last-minute surprises surface, they must be judged as either minor and easy to solve or indelible dealbreakers.

The final inspection (tepidly referred to as the “walk-through”) is the top reason for surprises on closing day, and for good reason: This final inspection of the home usually happens the day before closing, so there’s little time to prepare for whatever problems might pop up. Since you signed on the dotted line, a sudden storm could have poured water into the basement. Now that the furniture is all gone, you can see cracks in walls and a host of other flaws.

If it’s really bad, you should proceed with caution. “To avoid this snafu, make sure to inspect a home as thoroughly as possible before your final walk-through to avoid last-minute surprises,” says Gordon. You may even want to smart-phone video the home’s interior and exterior to document its conditions at the time you made your commitment or on a visit after the previous owners moved out (make that arrangement through your Realtor). “Don’t be shy about asking for another look-see after a big storm to vet for dampness or flooding,” says Gordon. She admits, however, that even a last-minute discovery of a problem is not necessarily a deal breaker. Ask the seller to cover the cost of those repairs by having them include a credit in escrow, but not until you come with estimates from professionals on how much those fix-its will cost.

The next most common issue to raise its head during the walk-through is misunderstandings about what stays and what goes. Perhaps you loved the seller’s antique stove, ceiling fan, outdoor kitchen set-up, other household items and assumed they would stay because they “appeared” built in or custom-selected — but you find out the sellers took these items with them and you failed to specifically itemize them in your purchase agreement.

Included items need to be documented and never assumed. Dealbreaker? Your call. “Unless you’re truly attached to the item, you may want to let this one slide if you want this deal to go through,” says Gordon.

Credit score surprises are indeed a jolt you won’t want to hold your stomach over. Even though you may have been approved for a mortgage a month or so earlier, you may not have been warned that even small changes in your financial picture can affect your credit score and create problems up to the moment you close on the property. Changing jobs, applying for a credit card, falling behind in paying bills, even sudden infusions of cash can red-flag your deal. Your lender won’t know you went “credit card crazy” until the final credit check just days before closing, and by then it might be too late.

It’s only truly bad if your lender withdraws the offer, because you won’t be able to close until you secure another mortgage, which could take weeks. The seller may even begin entertaining quick-close back-up offers. If the lender wants to increase your interest rate, as it usually does in these situations, you’ll have to decide if you can still afford the purchase.

Gordon’s advice is to head it off at the pass. “Contact your lender the day before closing to discuss and solve any issues that may have turned up,” she says. “Also, try to avoid making any sudden financial moves in the weeks leading up to the close, like quitting your job or receiving a $10,000 “gift” from a family member to help out with home buying—that could, ironically, throw a wrench into the process.”

Ahhh. The money. Closing days translates into the transfer of funds. “Some financial institutions and title companies prefer cashier’s or certified checks; others want funds to be transferred electronically. Show up with the wrong paperwork or account numbers, and you’ll be left scrambling,” warns Gordon. “To avoid it, ask your agent and lender before closing what form of payment is required. Also bring your checkbook to pay for small items that might crop up, like an unpaid electric bill.”

Lastly, your title company could be that proverbial fly in the soup. “The title company confirms details about your property such as past ownership, liens, and the aforementioned covenants,” says Gordon. “If any issues arise, don’t be afraid to step back and insist on taking time to digest any details, problems, or stipulations attached to the property.” If the search turns up tax liens or a claim on the property from a relative or co-owner, it can postpone a real estate closing.

“Other things, like the covenants I mentioned above, or unpaid HOA dues, may be surprises but not deal breakers,” says Gordon. Any and all title defects must be fixed before you can close on the property, however.

Signed, sealed, and delivered? Time to look back at that “childbirth” experience as the watershed moment it deserves. Because in time, all you’ll remember are the thrills, the smiles, and all those cozy nights watching Netflix with a slumbering baby in your arms.

Realtor, TBWS

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