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New Disclosure Rules Could Slow Home Sale Closings

Updated on October 18, 2015

New Real Estate Disclosure Rules Seek Clarification But Slow Home Sales

New federal real estate disclosure regulations that take effect Oct. 3, 2015 are likely to slow home sales closings, according to real estate law experts.

The new rules require that buyers get more time to review mortgage documents.

Some realtors say the average 30-day to 40-day turnaround to sell a home could stretch to as long as two months, according to a report by The Legal Forum (www.legal-forum.net).

The rules are intended to simplify the financial reporting and add consumer safeguards in home sales to protect buyers from mortgages they cannot afford.

Previously, lenders, title companies and attorneys gave buyers mortgage and disclosure documents under different schedules. The rules that take effect Oct. 3 require lenders to give buyers one document at a time.

The lenders must gather the relevant information from the different parties involved in the transaction before presenting it to the buyers in single documents.

The rules come as a disappointment for real estate agents and lenders who pride themselves on putting their clients in new homes as quickly as possible.

Buyers and sellers will have new duties as well. They will be required to prove their income by giving lenders copies of their Internal Revenue Service returns for the past two or three years.

If they do not respond quickly to information requests from lenders, both the closing dates and assurances on interest rates could be jeopardized. Buyers might need to seek extensions on interest guarantees to protect their rates.

The new rules also combine the truth-in-lending forms and Housing and Urban Development settlement statement into a single form. It breaks down all the costs for buyers, including interest rates, homeowner association fees and the costs to record document at the Registry of Deeds.

The information must be given to buyers no less than three days before a closing.

The new regulations are part of the Dodd-Frank Act designed to overhaul the U.S. financial industry and protect consumers from unscrupulous lenders.

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    • MarleneB profile image

      Marlene Bertrand 2 years ago from Northern California, USA

      Being that I use to work with military transferees, I understand that greater time length could be a bother. But, with today's electronic documentation and courtesy signings, even when a buyer or seller has to leave the area, there is still a way to make it happen. We want everything to be quick, but we have to learn how to slow down and get it right. I do understand needing the money quickly, but if you know going in that it is going to take a longer time to close, then I say... start the process sooner.

    • profile image

      Tom Ramstack 2 years ago

      The purpose of the rule is fine, i.e. greater disclosure and accountability. I'm wondering about the greater length of time to close. Some sellers who must leave town or need their money quickly might be bothered by the longer waits.

    • MarleneB profile image

      Marlene Bertrand 2 years ago from Northern California, USA

      Excellent coverage of this topic. I actually like the new rule. It seems complicated, but when people get a handle on the purpose of the rule, then they will like it too. Plus, if buyers know ahead of time that they are going to have to produce their tax returns, they might as well have them handy right from the start. No sense in waiting for the last minute. I say, go find those documents and have them ready. You know you're going to need them. So, go get them now. Right?