A flashing sign, "Expect Delays Ahead", can bring dread to drivers on the Thruway heading upstate. A similar sign could be flashing right now over most real estate purchases. In late spring, I was confidently telling clients that they could expect to close within 60 days of an accepted offer on a straight (not short) sale with mortgage financing if there weren't any unexpected glitches (usually with survey or title), and possibly even quicker. Recent experience then was that every step moved very quickly. If a buyer was using a local lender, the appraisal appointment would happen within 3 or 4 days of a completed mortgage application. The bank would usually get the appraisal report within a couple of days after that, and the underwriting review would be complete in a week or at most ten days. When the buyer's attorney ordered a survey, the survey was often complete and back within a week.
Then the market picked up, with a surge of new deals starting in May and continuing into the summer, with the volume of new purchases in the pipeline compounded by a huge flow of refinancings to take advantage of the sub-4% mortgage rates. The 'system' capacity was geared to the volume of the past couple of years, and has struggled to keep up with the sharply higher activity. Many lenders downsized their underwriting departments and shaved the number of closing attorneys. Some surveyors cut their assistants, and some appraisers left the business. There is just less capacity to handle the higher volume, resulting in a backlog and delays.
Many lenders, for example, are giving estimates of 60 days to close from the time of mortgage application (which is something that happens about two to three weeks after a deal in struck, after contracts are fully executed.) A 7 to 10 day lead time for an appraisal appointment is not uncommon now. The initial underwriting review can take two or three weeks. Surveyors can be backed up a couple of weeks. And once a file is cleared to close by the lender, the first available closing slot from the lender can be 10 days out. (Just a few months ago, when the buyer's attorney would call the lender to schedule the closing, the lender's response was typically "When do you want to close?", not "The first available opening we have is ..."
A bit of extra time at each step — a few days here, a week there — may not seem like a lot, but it adds up. Right now, from accepted offer to closing, a buyer using mortgage financing is probably looking at closer to 90 days rather than 60. If the volume increase continues, the key players in the process will ramp up capacity, hiring more underwriters, bringing on more closing attorneys and bringing back assistants. But that won't happen overnight. So for the time being, we're stuck in this traffic jam and there isn't a magic detour.
Steps Buyers Can Take to Speed Up the Process
Buyers, however, can take some steps to shave some time out of the process if they want to assume a little more risk. Traditionally, each step in the process is sequential. Buyers typically don't push the mortgage button (and pay the application and appraisal fee) until there are contracts fully executed by both parties — because until contracts are als signed by the seller, there is the possibility that they can accept a higher offer. But pushing the mortgage button when contracts have been signed by the buyers, and are out for signature from the seller, can speed up the process a few days.
Likewise, attorneys typically don't order title work and a survey until there is a conditional mortgage approval from the lender (meaning the buyers have been financially cleared, the appraisal is in, and has gone through an underwriting review.) It's safest to wait for that before ordering title and survey, because those two items can add up to a couple of thousand of dollars or more. But buyers can move up the survey and title work, and choose to pay for it before the lender has given the green light with a mortgage approval. There is some risk with this approach. Unless you're super-confident the house will appraise, it's best to wait until the appraisal report is received by the bank and the lending officer will tell you, informally, whether the value is supported. (Not all lenders will give you information on the appraisal until it has gone through underwriting review.) And it may not be prudent if you're purchasing what a lender might consider an 'unconventional' property — e.g. a log home, a house on large acreage (more than 20 acres), or a house that an appraiser may categorize in 'fair' or 'poor' condition.
If you want to close more quickly and move from a traditional sequential mode to a somewhat riskier 'parallel' mode (where the next step happens before the previous step is complete), you should get good counsel. With some of my clients, I may suggest it — based on the deal, the lender they're using, a review of comparable sales an appraiser is likely to use, and potential issues with the property. With other clients, I wouldn't recommend it, because of potential red flags and issues. They may want to close faster, but the risks may be higher to move into a parallel mode.
Hopefully over the next few months, the capacity of the system will get back in balance with demand, and buyers won't face unexpected closing delays.
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