8 Things Buyers and Sellers Need to Know Before August

We first wrote about this topic back in March and yet we still find many agents and buyers and sellers have no idea what’s about to happen starting August 1. Large companies like RE/MAX are lobbying Congress to delay implementation because so few are prepared and the impact will be great.

I’m attending a major seminar next week about the upcoming changes and their effects on real estate closings. Let us tell you what we know right now.

1. Currently borrowers receive two separate forms at loan application; the Good Faith Estimate and the initial disclosure. This is being replaced by a Combined Loan Estimate.

2. At the end of the transaction the HUD-1 settlement statement and the final TILA (Truth in Lending Disclosure) are being combined into a new 5 page single Closing Disclosure Form.

3. Closing times will be impacted by the new requirements. The CFPB (Consumer Financial Protection Bureau) mandates borrowers have at least 3 days to review the new Closing Disclosure. Review starts upon receipt of the form by the borrower. This means 6 business days unless you can confirm receipt by hand delivery.

4. Walk-Thrus will need to be moved up. Often times at walk-thru the buyer notices a repair item or something missing that was in the contract. The seller needs to keep a property in same repair up until closing. If the walk-thru is done the day of closing there isn’t time to change the closing statement. A title company cannot give a credit to the buyer on the closing statement without re-starting the time issue. It’s unclear if an item can be escrowed, but I have heard a repair can be escrowed as long as no money goes to the buyer.

5. If a closing is delayed for any reason, it changes to disclosure and prorations, which means the process starts all over and everyone must wait to close.

6. Line numbers have been removed on closing statement. There are now 7 fee areas on the disclosure, like origination charges, services buyer did not shop for, services buyer did shop for, taxes and other government fees, pre-paids, initial escrow payment, and other.

7. Buyers will receive more than one closing disclosure. There is one 7 days before closing and another noting any changes that occurred between initial disclosure and closing. One title company states this disclosure can be done post-closing but an attorney I spoke with familiar with that matter said differently, so we need more clarification on this matter.

8. Lenders have notoriously sent over closing packages the same day as closing. This practice will end, and that’s the good part. It will force many lenders to get their stuff together well in advance.

The hiccups will occur with lenders and title companies that aren’t prepared and on a strict systematized schedule. We also see problems when a lender does not have final clear to close from underwriting in time to make all these disclosures.

Additionally, if there are any changes like repairs, those must be negotiated well in advance. We see many deals falling through. Closings will take longer, and frustrations will mount for buyers and sellers. The government will not care that the buyer has a moving truck sitting in the driveway all ready to go for a week. The government will not care that the buyer wants to close; everyone will be forced to wait.

The government will not care that the seller needs to close by a certain date to close on their next house. Any changes will delay several closings, and nobody will care. The buyer can be perfectly fine with new changes, I.E receiving a credit, but everyone must wait to re-disclose and close.

Agent, lenders, and title companies will be pulling their hair out. Fortunately for me, I’m bald. A lot of education and communication will be needed as we inch closer to August. We can all gripe about it, but its here and we have to deal with it. If your closing is delayed, you can thank the government for more regulation. They won’t care, so just sit back and be patient. It is what it is folks!

Good luck and Happy Home Selling/Buying!

SW Florida Real Estate Market Update