WASHINGTON — More than half of real estate agents are planning to extend their sales contracts to provide more time for the closing process due to the coming implementation of new mortgage disclosures.
While the current HUD-1 settlement form can be revised and delivered up to the day of settlement, the new Truth in Lending Act/Real Estate Settlement Procedures Act integrated disclosures must be finalized and in the borrower's possession three days before closing. Failure to meet that deadline can trigger a reissuance of the closing disclosure and another three-day waiting period.
"When asked about their plans to deal with the new TRID rules, 55.9% of Realtors plan to change their purchase agreements to reflect a longer timeline, while 31.2% will add contingencies to the contract," according to a survey by the National Association of Realtors.
The survey did not specially ask how long an agent would extend a sales contract.
There appears to be no consensus on the issue, said Ken Fears, the Realtor group's director of regional economics and housing finance.
"Based on a handful of anecdotes, some are adding 15 days to a 30-day contract and others are opting for the 60-day contract," Fears said.
The Realtor group also found that 82% of real estate agents have taken some form of training to prepare for TRID regime that goes into effect Oct. 3.
Realtors also expressed a high degree of confidence in the ability of title companies to implement the TRID rules. Based on a scale of 1 to 5, three quarters of respondents rated title companies as a "3" or better in terms of their preparedness. The confidence level of 3 or better fell to 65% for lenders.
The Realtor association emailed the survey to over 57,000 members on Aug. 12 and had a 1.8% response rate.
Over the 12-month period ending in August, 9% of closings were delayed due to an issue involving the lending process, while 1.2% were canceled.
To avoid closing delays and cancellations under TRID, 30% of survey respondents plan to share contracts and amendments sooner with lenders, title insurers and closing agents; 33% plan to perform final or pre-closing walk-through home inspections earlier and 37% plan to develop a plan with lenders and title agents to smooth the transition to TRID.