According to the Ellie Mae Origination Insight Report for December 2021, the average time to complete a home purchase was 54 days—an increase from July 2021, when the average time to close was 44 days. Average closing timelines are getting longer—likely due to capacity constraints and staff burnout during high volume over the past year. While lengthier closing timelines impact borrower satisfaction, even more detrimental to a borrower’s experience are unexpected closing delays.
Closing on a home is a milestone event for many homebuyers. Issues that disrupt the closing timeline and result in delayed closings can create added stress for all parties involved in a real estate transaction and impact borrower sentiment. Being aware of common reasons for closing delays and learning how to streamline the closing process with technology can improve borrower and partner experience.
How prevalent are closing delays?
The most recent National Association of REALTORS® (NAR) Confidence Index survey found that 22% of closings are delayed and 73% of closings are settled on time. The remaining 5% of closings are terminated—often due to issues with financing or as a result of the buyer or seller backing out. While some closing delays are unavoidable, mortgage professionals can prepare themselves for closing delays to help prevent them before they occur. Here are some of the most common reasons closings are delayed:
- Partner and client communication issues: A large amount of information is shared during the closing process. Delays can occur if poor communication prevents required information from being shared between parties.
- Missing or inaccurate documents: Errors on closing documents and missing documents can lead to closing delays. Rekeying data can also result in documentation errors.
- Issues during the mortgage application process: A buyer’s financing may fall through during the mortgage application process, which can delay or terminate a closing.
- Home appraisal issues: If the appraisal comes in low, the buyer and seller may take time to negotiate a new price.
- Problems revealed during the home inspection: Costly issues and necessary repairs from the home inspection can lead to closing delays if the buyer and seller can’t agree on how issues will be fixed.
- Clouds on the title: Title professionals may uncover title issues during the title search that prevent a clear title. Depending on the issue, the closing process may not be able to continue until the title company cures the title.
- Weather delays: A sudden weather event—such as a hurricane, earthquake, or wildfire—can prevent various parties from getting to the closing table on time. Weather can also disrupt cell service, internet, or electricity and prevent communication between parties.
- Covid-related delays: Covid can delay closings if various parties are sick and cannot finalize closing documents or attend closings. In this situation, increasing digital closing options can help settle closings on time.
While many of these closing delays are out of a lender’s control, these issues can result in frustrated clients and partners. Closing delays can also lead to a loss of business if closings are consistently delayed.
How delayed closings impact borrower sentiment
Many homebuyers are eager to close on their new home and any unexpected delays can tarnish borrower sentiment. If additional life events—such as a marriage, new baby, or retirement—are adding fuel to the fire for a move, these factors can create added stress for the borrower and make closing deadlines even more important. According to research by STRATMOR Group and CFI Group, the industry’s Net Promoter Score (NPS) for mortgage origination—which measures customer experience—has experienced a downward trend over the past five years. This trend indicates that borrowers have become increasingly unhappy or unsatisfied with their mortgage origination experience.
STRATMOR studied the impact of closing times on NPS scores and found that failing to close a loan in the expected timeframe costs a lender 57 NPS points. Lenders who did not close in the expected timeframe had an average NPS score of 30, while lenders who closed on time had an average score of 87. STRATMOR found that communication was the biggest opportunity for improving NPS scores and borrower sentiment. While no one wants to be the bearer of bad news, over-communicating with clients at the first sign of a delay can improve borrower sentiment in the long run.
How closing technology and integrations help expedite time-to-close
Effective communication and data sharing throughout the closing process are essential to meeting closing deadlines and improving borrower sentiment. When certain milestones are completed within a workflow, automated communication can provide timely status updates and reminders when communicating with borrowers and partners.
In addition to communication, coordination between closing partners is key to ensuring all the steps of a closing are completed efficiently and accurately. A lack of lender-title integrations can lead to additional bottlenecks that negatively impact time-to-close. For example, integrated technology solutions allow lenders to share documents efficiently and securely with title partners while remaining within their LOS system.
Interested in learning more about lender technology solutions to streamline closings and prevent delays? Click below to schedule a time with our lender product specialists.