Closing a real estate transaction in haste increases the potential for errors. Mortgage closings are often time sensitive. The bank, buyer, seller, attorneys and title company endeavor to coordinate settlement before contracts and commitments expire. Some borrowers think closing is possible the day the loan is approved. This is almost never the case, as a typical loan takes two to three weeks to close after approval.
Commitment Letter
When a loan is approved, the bank issues a commitment letter. This letter details the transaction the bank has agreed to. The letter is almost always mailed to the borrower. The borrower has a set amount of time to sign and return the letter. Once the commitment is accepted, the borrower coordinates a closing with the bank's closing department. The letter takes a minimum of one day to get to the borrower. By the time the borrower has the letter and is able to schedule, several days may have already passed.
Scheduling
The number of people involved in the transaction make it nearly impossible to schedule a closing the same day. The bank grants the mortgage. The title company ensures the property is free and clear and performs the searches. The buyer and seller each retain an attorney. In more complex cases, the bank engages its own counsel. All parties must be available for a closing. Coordinating everyone is difficult under normal circumstances. Coordinating everyone on the day of approval is unlikely.
Searches
A lender performs due diligence on a borrower and collateral prior to closing. This is accomplished through a title company or search agency. The bank makes sure the title is clear with no intervening liens, that the borrower has no open judgments and that any business entities are in good standing with the state. In some cases, the bank absorbs these expenses. In others, it passes them directly to the borrower. Either way, it does not order the searches until the borrower accepts his commitment. Even if the borrower signs the commitment the day it is issued, searches can take anywhere from 48 hours to a week or more.
How it Can Happen
To close a loan on the first day, it must be pre-arranged. The borrower informs the bank of his intent at application. The closing is coordinated among all parties under the condition that the loan is approved. Searches are ordered ahead of time to ensure they are received prior to the approval date. The borrower will pay for the searches up front as the bank will not shoulder the expense if the loan is denied. The loan documents are prepared in advance and the borrower signs the commitment at the closing table. Every part of the transaction must occur seamlessly for this transaction to be possible.
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