As many buyers in the real estate market may know, beginning this October there are changes in effect for closing transactions with a mortgage. Sellers should also become familiar with these changes as their side of the transaction will also be affected.
Today I attended a closing on a transaction that was signed up “PRIOR” to the new rules and therefore was not subject to the new requirements. But all of us there were discussing how the sale would never have happened that day under the new rules.
Under the new rules, the closing statement must be prepared and provided at least 3 days prior to the closing. For the most part, that statement cannot change without having to wait another 3 days to close. Today, the closing statement changed (3) times. I’m not going to lay the blame on any party for missing items or making mistakes, but the reality is that today: the corrections were made, sent to the lender for approval and we closed with the modifications.
What would have happened if there was a moving company hired? If the seller needed the funds that day to purchase another home? Like other changes, the professionals involved in real estate transactions will figure out how to get it done effectively. But during that learning curve I foresee plenty of problems.
And remember, the final closing statement 3 days prior to closing is just one of the new changes.
I’ve been a real estate agent and broker in New Jersey for most of my adult life. One statement I’ve heard again and again when getting ready to list someone’s home is “my neighbor is asking “x” dollars for his home and mine is better so I want more than that”. While I understand what the seller may be thinking, the reality is that if a buyer is getting a mortgage, the home must appraise for the sales price.
An appraiser does not use the “asking” price of another home to arrive at the value of the appraisal.. Generally speaking, appraisers use similar homes, in close proximity to the subject property that have actually closed title in the prior 3-4 months. In certain instances, with a lack of good quality comparable sales, an appraiser may look back 6 months or look at a home that is under contract but has not yet closed title. However this is not their preferred method.
As a seller, you should carefully look at the comparable sales (or your agent should show you) when determining asking price. It will save you time and emotional stress being confident that your sale will appraise and actually close title. No one wants to sign contracts, start making plans to move, hire attorneys/title companies etc, only to find out halfway through the transaction that there is an appraisal issue.
Remember, the appraised value must come in at the “sales price”, not the mortgage amount. So be realistic and hopefully have smooth sailing in your transaction.