The last few days of the month are usually quite busy for real estate professionals. During the feeding frenzy the last few days of the month were downright crazy. If a slot wasn't reserved for the closing before the appointments were filled, the transaction closed on a different day. The time isn't quite as tight for closings now, but it's still a good idea to plan ahead if the closing is at the end of the month.
The closing date is chosen when the buyer's real estate agent writes the purchase agreement. Personal conflicts are taken into consideration as are how the closing date will affect acceptance of the purchase agreement. In most cases, closing dates are not a big factor in whether an offer is accepted or not. Occasionally, the seller may have a personal conflict which has to be avoided just as the buyer may. Either party may have work travel plans that can't be adjusted, medical reasons, or important personal conflicts.
The commonest choice for closing date by home buyers is the end of the month. Those unfamiliar with real estate may assume that's because apartment leases are up at the end of the month, but that isn't the main reason.
The primary reason to close at the end of the month is financial. Buyers make their mortgage payments AFTER they have been in their home for a month. If the closing is April 27 of this year, the first mortgage payment is made on June 1 (the first day of the next month following closing). Mortgages are charged interest on a monthly cycle so the payment made on June 1 includes interest for the entire month of May. The buyer has had use of the mortgage company's money for more days than the month of May because the closing was April 27. As a result, daily interest for April 27, 28, 29, and 30 are collected at the closing. That's 4 days of interest. On a $200,000 loan at 6% that four days of interest equals about $133.00. If the closing is 15 days before the end of the month (April 15), the interest collected at closing would be about $500. When buyers are tight for money to pay closing costs that extra $367 can make a difference. It's also money buyers would rather spend on new curtains, a lawn mower, or some other house related item!
This one factor alone explains why real estate closings tend to fall in the last half of the month and the vast majority are in the last few days. It's pure dollars at work!
Comments