Competitive Advantage: Under 30 Day Escrow Will Appeal to Sellers
Here’s an article that I originally wrote when the real estate market was a little more competitive back in March of 2010.
Our closing times are averaging about 27 days right now, sometimes even faster. Closing your loan early or on time is a huge competitive advantage when trying to appeal to sellers.
Can a 30 day escrow on your purchase give you a competitive advantage over other offers?
You Betcha! Sellers want to sell as soon as possible. You want a competitive advantage. This is the best of both worlds.
Typical escrow period listed on a purchase offer is 30 days from accepted contract. Most lenders will need 30 days or more in many cases to complete the loan approval and underwriting process. Many big banks will take 45 days or more to close escrow!
There are several reasons why a lender would not be able to close your loan in 30 days or less:
A Quality Pre-Approval is the Most Important Step
The Pre-Approval Process should be the most time consuming and paper work intensive part of the home financing process.
Your lender should ask that you complete the loan application, submit all of your income documentation including pay stubs, W2’s or tax returns and possibly even a 4506T form (permission to request tax transcripts from IRS).
Your lender should also ask for documentation to show all of your assets required to cover the down payment and closing costs required to close the loan.
If you are moving money from one account or another in order to have all of the funds in one place, this will require that you produce a paper trail documenting how much you had in each account before you moved it, paperwork showing the money being withdrawn from one account and deposited in another.
If you are getting gift funds, an inexperienced or unprepared lender could lose several days if this is not documented correctly. You need to provide documentation from the gift giver showing the money was available to give, accompanied with a gift letter stating the relationship to you and stating that there are no expectations that the money be paid back, because it is a gift.
Also, if instructions for receiving the gift funds are not clearly explained to you – your lender should explain this procedure – there could be serious delays and inconvenient burdens placed on the person giving you the gift.
Once all of your documentation has been received by the lender, the quality of the pre-approval is what will determine whether or not you are prepared to move quickly once your offer is accepted.
After you get your offer accepted….that’s when you separate man from mouse. The timelines are vital if you want to close quickly.
Although there are specific and strict timelines on when disclosures need to be sent out and when the appraisal can be ordered, you should be able to submit the contract, open escrow and receive an underwriting approval within 72 hours give or take a few hours.
You MUST ask your lender about their stated turn times. If your lender does not meet a turn time, and does not inform you until after it’s past, you are on dangerous ground and this may be the start of a pattern of broken promises and miscommunication.
A turn time is the time it takes to complete certain steps in the process. Common “turn time” steps are:
- Initial underwriting approval
- Time to review conditions
- Time until loan documents are ready to sign after being ordered
- Time to fund after loan documents have been received
The reason I am writing this post today is because here at Find My Way Home, we specialize in saving broken loans that other lenders screw up on, usually closing these “Loan Emergencies” in 30 days or less…our fastest was 10 days and that was due to disclosure laws recently passed that would not allow us to produce the loan documents faster.