Nevada Real Estate >> Las Vegas Real Estate Specialist: The Mortgage Commitment Date - Can realtors hurt the commitment date? Yes....

Does the standard 17 days on the purchase agrement still make sense?

Does that seem realistic?

Jeff - Definitely.  I have seen this time and time again that by the time the agreement is signed and executed the mortgage commitment date is too close.  Realtors definitely need to be aware of this.

Jeff, I usually set the dates as so many days from ratification, which in these parts is when you have the meeting of the minds and paperwork.  I'm having some transactions take more than a month to negotiate, and the price, not the settlement date, is usually the big issue.  This way, you don't have to mark up the date changes for the financing, appraisal and settlement each time there is a back and forth with counter offers.

Why were the dates unrealistic? DUH! You'd think it would be obvious. And IMHO, anyone in the process can "hurt the commitment date". You just never know what can go wrong along the way.

Jeff, Couldn't agree more with you on this.  We normally call the loan officer and ask how much time they'll need and write our contracts accordingly.  On the other hand, it would be nice if more loan officers were to send us the approved commitment when they receive it from the lender.  It is required in Florida and I almost always have to ask for it.

Jeff: Great points. We recently had a loan close late because we had 22 days to close after everything was signed around (due to insprection issues). Of course we had delays including IRS computers being down for a day (transcript issue) and PMI deciding to not allow one of my borrowers on the loan (not enough credit). Fortunately, most of the realtors listen to me about closing dates. The other thing I've seen is how understanding the realtors I know have been. They've all seen loans close late these days. To put it  all in perspective, a 30 day window is actually more like 22 business days. Add in the increased time to order transcripts (4 days), underwriting, potential PMI underwriting, appraisal, etc. and it's a really tight time line these days. Thanks for the post. I hope everyone reads it!

I forgot to even mention escrow issues. We recently sent docs. to the escrow company in time but they claimed we were too late. The issue was with the new RESPA rules, escrow takes more time to get the HUD-1 ready to the lender's satisfaction. Oh well!

So many agents try to push their timelines on the system, instead of trying to work within the limitations of the system.

You're right on with that fact that each transaction is different and should be treated as such.  I RARELY get a call from an agent asking how much time we'll need for commitment and closing.  The few times I do it's always can I do it faster.

RALPH..... .  I don't exactly follow what you are asking. The "standard 17 days" for listing a commitment date?  And 17 days is standard?  I have never heard of anything as a standard date.  Just for the fact that each client is different, that the realtor involved should be asking the loan officer what would be a good date.  thanks

CHRISTOPHER..... . I am glad that you notice this. Have you ever told the other agent about this?  And if so, where were their responses?  thanks

PATRICIA.... .  a whole month?  wow.... So much could change then for the buyer, such as the interest rate that was quoted.  I kind of talked about that in this post.  Interest Rates on the rise. In any case, it's good to know that you set the dates after it's been revised and full accepted.  thanks for your input.

LISA..... . well, it must not be obvious to so many, because I am seeing this more and more on agreement of sales and it's driving me crazy.  And yes, anyone along the process can hurt the commitment date. But in regards to my topic, it starts with the realtors who actually set the commitment dates and I just wanted more to be aware of this.  thanks

GABE..... . still waiting for you one day to call me. ;o)  Seriously though, that is great that you call the loan officers. I am just shocked that many don't send you the mortgage commitments, the approval, when it's completed. I love sending these out, especially when it was done very quickly.  thanks for your feedback.

PAUL.... .  most of what you mentioned were issues in regards to trying to close on time.  My main issue is not so much the closing date, which I have seen some set that weren't realsitic, but the commitment dates that aren't realistic.  In any case, thanks for the kind words and the compliment.

PAUL again... . yes, the new RESPA rules can sometimes delay a closing now also. I wrote about this : The MDIA issue - thanks

DREW..... . I agree, that some realtors try to push certain time lines. I have one right now, on a USDA loan and the listing agent thinks that we are having problems.  It was just a very detailed borrower that is self-employed. Too many wholes to fill prior to underwriting, with the fact that we had higher ratios.  So we wanted to cross our "t"'s and dot out "I"'s.   And I find it comical that when you do get a realtor that calls you about the commitment date, that they try to push for a quicker date. thanks for your feedback.

Jeff,

I completely agree with you.  Constantly see this especially with the short sales and foreclosed homes.  The closing date is usually 30 days from the first signer, and 15 days for commitment.  By the time everybody gets it signed correctly, at least a week or so has passed.  I try to educate my realtors on time lines and sometimes I think I'm talking to a wall.   Some would rather not offend the bank that owns the property and promise everything. 

I also don't understand these banks that own the properties giving these deadlines.  They do loans and know what their requirements would be, yet they expect us to pull off a loan in this environment (FHA) within 2 weeks from completed contract.  Most will extend, but not all. 

I just had one seller cancel due to not getting the commitment within 2 weeks.  Bank approved shortsale signed 3/1/10 for 4/1/10 closing on FHA loan.  Neither the buyer's agent or I received contract until 3/15/10.  Asked for extension, seller denied and cancelled contract.  Seller thought she could still get a back up contract to close by 4/15/10.  Hate to tell her, he is still doing a loan (not a cash deal) and it won't close when she thought it should.  In the meantime, she lost an approved client where the only thing we needed was the appraisal to be completed.

There are many reasons why come agents may push these limits and here are just a few:

1. Some agents may still be stuck in a time warp when loans could be closed in 2 weeks
2. Overzealous buyer won't listen to reason (just has an agent submit an offer on a short sale with closing taking place two weeks from the date of the offer.  Buyer would not budge)
3. Feels strong arming lenders will make them move faster (and probably carelessly)
4. Above all is simply unrealistic expectations.

Jeff your my Hero!!!!  I am glad you are talking about this topic.  The good old days when we could close loans in one week are long, long, long gone.  Turn times are taking longer with underwriting because of the overlays with the investors, appraisals take longer because of the management company's reviews, and now ordering the tax transcripts.  I had a new agent who has purchased personally four houses and the last one being about five years ago, could not understand that I told her 25-30 days on a contract.  She said it should only take two weeks.  I explained to her about all the new changes and then showed her a file of mine that was just submitted into underwriting how thick it was.  I bet about 120 plus pages.  If you add respa, income, asset, appraisal, title, tax certificate, FHA docs and all those CYA forms now a days they sure add up quickly.  There is no more fast and easy loans any longer!!!  Good luck to you and thanks again.

You are right on ! I like to have 30+ days for commitment and 45 day settlements. The PA. Agreement of Sale leaves the Seller in total controll unless the Buyer extends the commitment date in writing !!!

Hi Jeff -- You are right with this topic, I totally agree.  That said, in my experience, I rarely have a lender provide a loan commitment letter by the date specified in the contract, even when the date is reasonable.  Moreover, I find that some lenders don't scrutinize the HUD1 closely enough, minor changes are made, that sometimes delay settlement for things that could have easily been caught earlier in the process.

I write loan approval "XX days from date of agreement" that way, it doesn't matter how long it takes to negotiate it, and I always check with the lender ahead of time to ensure it's enough time for them to process and approve it.  That way, everyone is happy.

Jeff - It is extremely important for agents to have open lines of communication with their buyer clients lender.  Prior to even showing a buyer property I discuss things like this with their lender. 

Could you imagine if a buyer told their agent they had 12 hours to find them a house, how realistic is that when there are things out of our control like a listing agent having to accompany the showing.

Great post!

Excellent post Jeff,

In Manhattan closing dates are never firm dates. The closing date on the contract always says "on or around" a specific date and there is an automatic 30 day extension. A closing can take 60-90 days. There are too many variables involved. I've had buyer's commitments expire and/or their rate locks.

Loan Commitment is not an actual date on contract but the amount of days from delivery. Delivery means the day the buyer's lawyer receives the fully executed contract back from the seller's attorney. It will say commitment 45 days from delivery.

Jeff:

Our contracts read:  (blank) days from effective date of contract meaning the count starts with the last signature. 

I always check with the lender before filling in the blank if I can.  Sometimes the buyer is already working with a lender that is hard to contact.  Then things do not work out as well.  It is not always the realtor's fault.  

I know the new rules for the HUD are making things difficult, especially if one side happens to be a mail out.

Here in Florida the norm is 10 business days for a conventional loan and most companies here have no problem meeting that deadline. FHA can take longer. Even if a few outstanding items like the appraisal or survey exist, those are things that are dependent on the home "doing its stuff". They have nothing to do with the buyers ability to handle the payments or down payment. Our contracts have specific wording that allows the buyer to cancel if the appraisal comes in after the commitment and is below the contracted price. Same for survey since it will appear as a title defect. Most of my sellers understand that the home has to pull its own weight and just want to confirm the credit-worthiness of the buyers. That should be very possible within 10 business days.

Also, I do not have the commitment period begin until all parties have signed the agreement and we have an executed contract. Then the business days move from the effective date. I do the same for inspection periods since to put in a specific date can be problematic if there is a delay in getting signatures. 10 business days from the effective date, makes things more flexible. And really watch this when you are working a short sale!

Our lenders here have no problem making these deadlines. However, I have found that when the time was longer, invariably the lender took until the last minute to approve. If the deadline is reasonable, there is no reason to stretch it out forever. A lot of agents work beyond the 9 to 5 box to get the job done, perhaps some of the lenders should as well. So do, but most that I have run into do not. Most agents will agree that lenders work at their own pace and they will not vary a whit for you, unless they are a small town bank that believes in customer service that is a step above.

Jeff,

Setting the proper expectation from the very beginning is always a good way to start. I' glad you posted your thoughts

Perfect.  Nothing to add.  Well-written and very explicit.  Take a course on mortgages, realtors.  Then work with the lender....call if necessary. 

Most of the time I'm the listing agent so I always look at the loan commitment date or time line. I'll question it with the buyers agent and ask if they've discussed this as a realistic date with their LO. If they tell me ok then it's their responsibility to meet it. If they don't then they better have a request for an extension in writing with in the proper time frames. If not then they put their buyers deposit in jeopardy. In most of our contracts it also states that the buyers agent...buyer and LO must keep the seller and listing agent fully informed of all aspects that pertain to the loan and the commitment date. And at that time I do not want to hear from the LO officer that they aren't considered a party to the contract. That might be true but then if they say they aren't obligated then the contract should not have that clause or they shouldn't write it in or even use that contract if they can't follow a time line. It's the only protection for the seller. They changed or FAR 9 a few years ago. It used to say all deposits would be returned...now it says if they don't meet the time line...the seller can go after it...that's it...plain and simple. If they can close quick and the seller agrees then they better meet the date. I'm not going to take a property off the market and then have a loan fall through because the other side says this and that and then never makes it happen. If I was the buyers agent you can be sure that I'd be protecting the buyers deposit by making sure the mortgage broker or LO know they can make the date. Sometimes they still can't and then they run away because they can't be held liable. It's a bad way to conduct business. They always blame the underwriters...so maybe they need to ask them first before they commit.

In New York all bets are off. Too much red tape and layers of steps added on. A 30 day closing would be a wet dream here. Try 60 and 90 in the City.  

Hi Jeff,

I'm totally boggled by the idea of a 30 day close, especially if that close involves a mortgage.  45-60 days seems to be the norm around here .... closer to 60 than 45 in order to avoid countless contract addendums to extend commitment dates and the like. 

You are right....we do have to be mindful of timelines and realize that one piece of the deal depends on another, which depends on another, etc.

I'm all over my customers to order what's needed within the first day (no more than 2) of having an executed contract.  No sense in waiting to get everything done that needs to be done. 

It seems to me, though, even when all of the documents are ordered and obtained in a timely manner, things often fall apart on the lender piece.  Not sure why that is, especially when clients have info documenting their stellar credit ratings, etc.

Here's hoping there are smoother waters ahead for us all.  :)

Jeff,

Great post. I think the key here is to work together. Simple.

Jeff, I like this post.

I normally work with sellers, but its good to have an idea of what to expect, especially when the selling agent is telling you something different.

I will bookmark this post and share it with my agents.

Jeff- EVERYTHING takes longer now a days. Everything. I am dealing with one now where the price changed and a new disclosure had to be sent with the 3 day rule. Then the lender said when it came out of underwriting that there were some internal issues that needed documentation (new home owners insurance reflecting new amount, new HUD1 reflecting new amount from title company and last employment verification. The lenders policy was 48 hours for such then another 24 hours to prepare closing documents. So...one change caused a 6 day delay plus 2 days for weekend...8 days total.

TINA.. comment # 10.... .  the banks owning properties that have quick commitment dates and settlement dates?  I have no idea why. To bust lending stones?  lol   And yes, 30 days to close a loan is doable, but still pushing it on many loans.  But if I am closing a loan in 30 days, make the commitment date at least 21 days or longer from the contract date. What irks me is that there is a mortgage company that guarantees closings in 10 days... but once you read the fine print, you begin to laugh. It's called a marketing ploy. Sure, I could close a loan in 10 days if I really had to, but not each loan that I come across...  Overall, as you mentioned, just educating everyone involved in what to expect.  But how does one know if the realtor doesn't contact you prior to the contracts being drawn up.  thanks for your feedback.

CHARITA..... .  I think some are still stuck in that time zone.  Besides, even 2 weeks was hard, unless it was a slam dunk conventional loan.  But from start to finish, 2 weeks is still tough back then because you would have to stop working on some of the other loans.  Ask any good honest loan officer about this.  But you do bring up some good points and thanks for sharing these.

STEPHANIE.... . glad to be your hero, but what loans were you closing in one week?  lol  Seriously, every once in a while I would close a loan in 5 to 7 days, but to help someone else when their previous lender dropped the ball.  But other than that, it would be asking too much from everyone involved in a loan.  But overall, as you have stated why it takes so much longer, we need to keep getting this message out there.  Besides, just because one loan closes quickly doesn't mean they all can. That is something else that I am trying to get across to so many out there.  thanks

MICHAEL.... .  I would love 30 days for a commitment and 45 days for a closing. Less stress and more time to get things done.   In NJ there is an automatic extension of 30 days if the commitment date is missed.  thanks  PS>. I can do loans in PA also... ;o)

CHRIS..... .  there are still many lenders and loan officers that aren't just good....  and in some cases give the rest of us a bad name.  And sometimes I pick up new clients because of these lenders dropping the ball.  Overall, I am glad that you check with the lender to ensure that the dates are enough time.

MICHELLE.... . that's awesome that you even talk to the lender prior to showing the buyers a home. Yes, communication is soooo important, yet so lacking in many cases.  I wrote about communicating.  Communication - How important is communication?  And thanks for that very polite compliment.

MITCHELL..comment # 16... .  your closings are taking 60 to 90 days?  I know we briefly talked about this when we last met, but I would be glad to help some of your clients.  Just give me 45 days and we'll all be happy.  ;o)   Especially your clients rate locks expiring. If it wasn't the fault of the borrower, then that lender should be extending that rate free of charge. In any case, thank you very much for that polite compliment.

30-45 days is typical for me, but I get nervous when it stretches out to 60 and we've had to extend - a lot of times those just never close.

I was just fit to be tied on one of my previous transactions.  Our mortgage committment date was set unrealistically by the sellers (we are an extreme seller's market here) and the lender PROMISED PROMISED PROMISED and couldn't deliver.  We did close but it was frustrating with the promises that were made.  I made every attempt PRIOR to contract execution to make sure we could hit the dates but we couldn't.  Too many lending difficulties these days!

BARBARA ... comment # 17 .... .   I never said it was always the realtors fault. What message I wanted to get across here was that realtors in some cases need to be more realistic with their commitment dates and settlement dates.  And yes, contacting the loan officer prior is always a good move.  But you stated that sometimes it's hard to reach the lender or loan officer. As many of us know, this can be a red flag 50% of the time or more.  And yes, the new rules are making it tougher to have closings happen on the contract date specified.  thanks for your input.

JOHN.... .  the norm is 10 days?  Sorry, but I don't care if it's a conventional deal.  I will say this, because I know a few good loan officers and lenders in Florida.  Okay, maybe if the lender only does conventional loans, that they are a small company or maybe the processor only has 1 or 2 loan officers on their desk... etc etc.  But conventional loans have to be HVCC compliant. Sorry, but I just don't think 10 days is the norm, no matter if they closed that one loan or a few in 10 days.  In one part of your comment, you stated 10 business days.  Well, that could now mean 12 days all together.  In any case, it comes down to expectations, and when things get done.  You need an appraisal and title to be ordered and finished in 6 days then for a 10 day commitment.. and fully processed. I would love to see some of the commitment letters that you have received. I would bet they are many conditions on them. Just too much out there to get a commitment in 10 days.  In any case, thanks for your feedback.

CRAIG.... .  I agree 110%.... I wrote about expectations.  Setting all expectations to be reasonable. thanks

SUZANNE.... . wow... thank you very much for the kind words and for that polite compliment.  I would not say perfect, but I do think the message should be spread amongst all realtors and lawyers out there. In a time when things are a bit tougher from past years when trying to get loans done, I am seeing dates set for quicker results than I did in past years.  Just curious to as why?  It should be the opposite in my opinion.

NEAL.... . I loved your comment.  Yes, I have heard of so many loan officers run away after certain dates couldn't have been met. I know this myself because I end up doing about 5 loans a year that other lenders dropped the ball on then the borrower found me online. So I clearly understand what you are saying. But I rarely get a realtor that would ask me if the dates set are realistic. Or that the dates are amended after it took longer for the contract to become binding, finished with all signatures.  Overall, you bring up some good key points.. thanks for your feedback and input.

J. PHILIP..comment # 22... .   I wonder why 60 or 90 days... did you read Mitchell's comment # 16?  He said the same thing.  I would love a 45 day closing... I think 60 to 90 days is way to long. And I have even closed a few loans in NY and Long Island in the last 6 months.  Maybe the lenders in that area are just slower. Maybe we should talk.  ;o)

I always point out that the closing date on the contract says on or before. In the old days of anything goes lending without proper documentation, sure we could close quickly. Now that a full process is required with timelines, regulations, and full docs, we need to get real. Since I go back 20 years in business it just seems like normality has been restored.

COLEEN.. comment # 23... . I am going to take a stab at a specific comment that you made.  You said.. "It seems to me, though, even when all of the documents are ordered and obtained in a timely manner, things often fall apart on the lender piece.  Not sure why that is, especially when clients have info documenting their stellar credit ratings, etc."

Not attacking lenders in Florida, but a lot of how a loan gets done starts with the loan officer. How good of an application that they take and how much of the information did they collect from the borrower.  This also happens in other states, when loans need extensions.  About 25% of my business is done in Florida and I am baffled myself on how long it takes some lenders.  Yes, it could be the lenders, but most of the blame that I place is on the loan officer.  I might write a blog on this...

Overall, yes, time lines need to be talked about, with all parties involved. I would love to have a 45 day closing, with a commitment date due 30 days from contract. My life would be much easier.  But overall, in my opinion, hitting specific dates comes down to good communication and being prepared with the borrower going into contract. I think many loan officers don't do the appropriate leg work upfront when they pre-qaulify a borrower.  Just my opinion.

BOB.... . I would agree... and thanks for that polite compliment.

MELISA..... . I am sure agents would sometimes tell you something differently. I have seen and heard it first hand myself. And so many people point the fingers at others. And thanks for the compliment.

MARTHA.... . it clearly sounds like this loan officer is not setting expectations for all that are involved. I wrote setting expectations to a certain level.  You know that even though I am New Jersey, I could always help out some. I can do loans in Maryland. ;o)   PS.. if my policy was 48 hours, I tack on 24 more hours and stay on top of it. So many things can happen just to delay the answer for one more day.  Hope that deal works out for you and your clients in the end.

PAM.... .  I am still amazed at 60 day closings... I wish I had that much time.  ;o)

RENEE... comment # 29.. .   I am sure many of the sellers have help from their agents when it comes to not setting realistic dates.  But when a lender promises and promises, it's usually to get everyone off their backs, especially the loan officer. I see and hear this more often then we should.  Overall, yes, there are many lending difficulties, but so many use this as an excuse when things are delayed, which ticks me off. How does one know what the truth is anymore?

I don't know what you guys are talking about. I am still closing loans in 7 days (on average)...totally kidding!  In all reality, I think a 30 day closing is realistic but there are cases when it goes longer than that and I think it's critical that the Realtor call the loan officer to get a feel for realistic timelines and potential pitfalls for each loan.

I saw an ad the other day that promised a 3 day closing. After reading the fine print, I learned that this is 3 days after they have the appraisal and all the conditions signed off too. Unbelievable!  I hate that some people fall for this garbabe!

Great topic.  I have been trying to communicate similar concerns to my realtor's.  I feel that the perception is that we as the lender will take longer if the dates are extended.  In this market, time is of the essence, as lenders we know this.  Guideline changes, funds running out, MIP increases, 2nd appraisals and etc.  I am not taking any longer than I need to get an approval and close.  Being realistic serves everyone better.  Missing commitment dates and etc only worsens the experience for the client, it adds a level of stress that could be avoided with more realistic expectations in the beginning.  Everyone understanding the market and process is the key.   

Jeff: couldn't agree more. In the past, I've bent over backwards to meet commitment dates as written in the contract whether I've been contacted before hand or (more likely) not. These days, it's not enough to hustle. With all our new regulations and procedures it may be impossible to meet expectations if we are not contacted ahead of time and consulted with closely before writing the contract. Great info. Thanks for putting it "out there."

I always write the commitment date as the day of or the day before closing.

Jeff, While lenders may be taking a little longer than in the past we've always had 60 to 90 days closings for coops and many condos. Houses can close faster. It takes so long because of the management companies that manage condos and coops. Even cash sales can take 60 days. The condos and coops have their own purchase application and board package. We can't submit the board package to the management company until the buyer already has a loan commitment. A copy of the loan commitment letter goes into the package along with other documents, references etc. The management company can sit on the application for weeks, then they send it to to coop board or condo association. The board has up to 30 days to approve the purchase. Some require interviewing the purchaser. Then scheduling a closing date that all parties can agree on. There are usually several parties (buyer, seller, and their lawyers, lender attorney, title company, closing or transfer agent) The management companies closing department is often backlogged and under staffed. I had a rental sublease in a condo that took 2 months to get approved. I had to change the lease dates twice. In another condo rental it took less than 24 hours to be approved. Go figure!

Damon you're tough. I normally go for 45-60 day close and mortgage commitment 10 days prior.

In a tight situation we see 30 days but you'd better be right on top of EVERYTHING. No room for error.

Jeff,

We see it  common place that the commitment happens when the loan is funded. Glad to hear it's not that way everywhere.

Steve

Jeff,

I'm surprised the agent wouldn't consult with you first before putting in a commitment date. Don't you think it would make more sense if they at least got an idea before throwing in a date? What happens if they don't call you and a contract is promised with let's say 15 or 20 days and then you can't meet it. Don't you think both parties might be a bit upset or disappointed if they packed and had to make moving arrangements and then comes the snag? I'm not saying everyone but you know that most people expect us to know the drill. I'd want my Realtor to be in communication with the loan officer or mortgage broker. It's my deposit and I want to make sure it's protected. Sometimes you'll get a bitter seller who would want to try to collect the escrow and this is coming from me...an agent who is mostly on the listing end.

Sometimes I've even caught buyers agent putting in a closing date of on or before 30 days and then try to put in a loan commitment date of 45 days...makes no sense and I'm not sure that is a mistake.

Amen my man ! I never write up offers with commitment dates less than 30 days !!! If it comes in sooner then great :o)

OH AND HAPPPPPPY BIRTHHHHDAY BRUTHA !!!!!!!!!!!!!!!!!

Someone said it's your birthday, so just wanted to say HAPPY BIRTHDAY!

Hi Jeff...My commitment dates are always pretty close to the settlement date.  Most of our appraisals do not get done until just before settlement.  Without that important information we cannot get the commitment letter.  I've had listing agents question the dates I use and I tell them exactly why I do it and will not change it.

Kate

Jeff, You said it best with this line..."Team Work & Communication". With everyone working together and communicating, all parties get what they want in a timely manner.