‘Cue Stomach Drop’: What We Learned From These Home Closing Day Meltdown Stories
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The closing table is the place for buyers, sellers, real estate agents, and title company representatives to come together—in harmony—to complete a real estate transaction. Most of the time, closing day goes off without a hitch. Sometimes, though, things don’t quite go as planned.
But just how messy can it get?
We recently spotted a lively discussion taking place on the r/RealEstate subreddit after one user posed the following question: “I’ve heard of deals falling apart at the closing table but I’m wondering what would cause it. Does anyone have a story how this has happened?”
Users weighed in with cautionary tales of buyers’ and sellers’ best intentions going up in flames on the day they were supposed to close on a property. The common thread among this sad sampling of scenarios: a total and utter lack of common sense. It turns out, some people just can’t get out of their own way. Here are some of the most memorable collapses.
The (not so) big ballers
“Perfect seller, perfect buyer, everything had been easy peasy and we are sitting at the settlement table at 4pm. The lender noticed that there was a set of car keys on the table that still had the dealer ID tags on them and made the offhanded comment, ‘You don’t have to keep those on after you get it serviced.’
Cue stomach drop.
Turns out [the buyers] went out that morning and bought matching Dodge Challengers on dealer financing to celebrate their home purchase. They didn’t think a car loan and a house loan would affect each other since it was with a different bank.
The dealer wouldn’t take the cars back and they ended up having to sell them back at a loss, got nailed with a pre-payment penalty on the car loan, and wound up not qualifying for their home loan anymore.
Common sense, people. It goes a long way.”
— tanko89
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The diamond dilemma
“Former loan processor here. The most painful one I remember is a dude and this girl, jointly co-signed a $10,000 loan on a new diamond ring because they were ‘buying a house together, so they wanted to celebrate.’ They lost the ability to fund the home loan.
The wife loved the ring so much that they just decided to no longer buy the house. They lost only about $1,000 earnest money, but it was so absolutely stupid of them. The loan officer also basically begged them to take the [$2,000] loss on the ring and buy the home. They wouldn’t.”
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The unusual suspect
“A loan officer friend of mine hadn’t heard from the buyer/borrower in a few days. I believe they were waiting to sign their documents. Found out the buyer had been in jail. Two bodies were found in his trunk when he was stopped by law enforcement.
When I tell people literally anything can happen until you have the keys in hand, I mean it.”
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The Bickersons
“Divorced couples selling their house were the worst. We had one couple where the proceeds did not divide evenly so one had to get the extra penny. They literally fought over a penny.
They were so locked in their fight they did not notice as I left the conference room, walked out of the office to the parking garage, and fished a penny from my ashtray. I walked back into the conference room and dropped it on the conference table. I looked at them and said, ‘Here is your penny. Now you’re even. Get the hell out.’”
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The regretful retiree
“A completely uneventful contract made it all the way to the closing table. Everybody signed their documents. In my state you sit at the table and wait until everything’s finalized, the loan is funded, deed recorded, and then everybody walks away with their keys and checks.
The buyer, seller, their agents, and the loan officer are sitting at the table chit-chatting when the buyer mentions that they’re going to go out immediately and start enjoying their retirement in the beautiful lake house he just bought. He had retired the day before from the job that qualified him for this loan.
Everybody at the table had just witnessed this guy sign an affidavit under penalty of perjury that the information he had entered on his loan application was accurate and hadn’t changed.
No one walked away with keys or checks that day.”
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The guy who failed Real Estate 101
“The buyer comes to the table and doesn’t understand that we’re not returning his earnest money deposit and it’s being applied to his purchase. He sat at the closing table for 5 hours arguing with us (the title company, Realtors, attorneys, and sellers). It was a nightmare. Everyone and their mother tried to explain it in a way he could comprehend.
Finally, he just gave up, signed, and then left. I don’t know what finally made him cave but dude seriously did not trust the math.”
– islandchica56
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The $300 delay
“I once had a buyer and seller squabbling over $300. Something insignificant had come up during the final walk through.
This was about 10 years ago when all relevant parties would be present at the closing table.
Finally, one of the attorneys stood up, whipped out his wallet and threw three crisp $100 dollar bills out on the table. The buyer proceeded to pick up the money and we closed.”
How to avoid a closing table meltdown
If you plan on making a real estate transaction in the future, there are a few key lessons you can glean from the scenarios above.
Don’t go on a credit-fueled spending spree
First and foremost, soon-to-be homebuyers should never—under any circumstance—make a big purchase on credit when they’re in escrow. Like the couple who financed sports cars on closing day, you can severely damage your standing with your lender and, worst-case scenario, not qualify for your home loan anymore. Avoid a last-minute surprise by contacting your lender the day before closing to discuss and solve any issues that may have turned up while you’ve been in contract.
If your job situation changes, say something!
In a similar vein, changing or quitting your job can affect your loan approval. If you’re a buyer under contract, don’t change jobs without keeping your lender in the loop. And please (for the love of God) don’t retire like the clown in the scenario above. Your employment history and income (as reported on your loan application) prove you’ll be able to pay the giant sum of money your lender agreed to give you. If you do have a change in employment, let your lender know. It could have very little impact on your loan—or it could crush your dreams of homeownership.
Know the deal with closing day
Homebuyers and sellers should have a cursory understanding of the closing process and everything they need to bring on closing day. Buyers, be sure to review your closing disclosure form, also called the HUD-1 settlement statement. This document outlines your exact mortgage payments, the loan’s terms (such as the interest rate), and additional fees you’ll pay, called closing costs. Unlike the very confused gentleman in the scenario above, you should expect your earnest money to be applied to your down payment and closing costs.
Sellers, expect to do a lot of waiting and reading (not the fun kind) on closing day. You’ll also have to sign some documents, including the settlement statement. This very important piece of paper details how much you’re making on the sale, plus tax implications. If the numbers differ from what you were expecting, say something to your real estate agent or attorney.
Be prepared for the final walk-through
The buyer and seller who dug in their heels over $300 were lucky to have a lawyer who was flush with cash and willing to break their stalemate. If you happen to find yourself in a similar dispute over a problem discovered during the final walk-through, there are a few courses of action. The buyer’s agent should immediately inform the seller’s agent of the problem and, more often than not, the seller will fix it to move the transaction along. If the seller refuses to address the problem, the buyer can either proceed with the sale and deal with the problem later or back out (and risk losing the earnest money).
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