Most people who have participated in residential real estate transactions as buyers or sellers remember experiencing last-minute changes at the closing table. Real estate agents, mortgage lenders, title companies and escrow companies are familiar with harried changes to the HUD-1 closing statement and to mortgage documents, which changes often lead to aggravating delays and additional costs.
As of August 1, 2015 our closing table dramas are scheduled to come to an end.
The Real Estate Settlement Procedures Act (RESPA), Federal legislation enacted in 1974 to protect consumers from unscrupulous and confusing real estate practices, is changing in several significant ways. The changes are all designed to protect the consumer, the buyer and the seller in each real estate transaction.
And while everyone generally agrees that consumer protection is crucial, some of the changes may prove to be challenging, both to real estate professionals and to the consumers they serve.
Before getting into the specifics, here are two basic reasons the new RESPA requirements may become challenging: 1) the need for more specific consumer disclosures, and 2) the need for those disclosures to be presented to the consumer in final form 3 days prior to closing.
Conceptually, specific disclosures, as well as strict timelines for completion by professionals and presentation to consumers, both sound like excellent ideas. Under ideal circumstances they will undoubtedly be a big improvement over last-minute changes to a HUD-1 and to mortgage documents at the closing table.
But there’s a catch – when certain changes to closing documents become necessary after August 1, 2015 another 3-day waiting period kicks-in.
Closings that drag on for several hours are one thing, but closings delayed by 3 days, and possibly another 3 days, and yet another 3 days… that’s another thing entirely.
Delayed closings invariably lead to more calculation and documentation changes, which lead to more delayed closings, etc.
To understand how the new law changes the buying and selling of real estate all over America, take a look at the new disclosure forms. Essentially, the Good Faith Estimate is combined with the Truth in Lending (TIL) disclosure, now called the "Loan Estimate," and the HUD-1 settlement statement is combined with the final TIL, now called the "Closing Disclosure."
The National Association of Realtors© is advising its members to expect typical closings to begin taking about 2 weeks longer than usual. If 30 days has been the norm, agents and brokers should expect 45 days, and that means they should tell their buyers and sellers the same thing.
Will consumers eagerly embrace the notion that closings on typical home sales will now take an average of 45 to 60 days? Fortunately, the longer time frame covers the very real possibility of one or more 3-day waiting periods, although it’s certainly possible that none will be required. It’s just not too likely.
Only time will tell how the new RESPA rules actually work in the interest of consumer protection, but you can sell us your house now and avoid the wait.
Thanks for the post. Good info.
This is why I LOVE commercial real estate. Regulation on the residential side is a nightmare.
The government wants to keep helping people but nobody asked for the help! lol
So as an investors this means cash deals will be even more enticing as well as seller financing. Am I correct in predicting this or am I missing more details?
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