I just went through this with a client and have run into this a few times before so I thought it was time that I warned you about this.
The end of the month is the time that the highest percentage of closings occur. One reason for this is that buyers who are moving from a rental have leases that go through the end of the month and other buyers plan their move for month end.
To give you an idea of the dramatic increase in closings at the end of a month, in a typical month, about 10-15% of all closings are on the last business day of the month, 15-25% are during the last 2 business days of the month and 25% are completed during the last 3 business days of the month.
So if there are 1600 closings during a month, you would average about 53 per day based on an average of 20 business days a month. During the last 3 days of the month the average per day would be 133; during the last 2 days of the month that average per day would go up to about 135 and the last day of the month would have about 200 closings.
With that much of a spike in volume you can probably imagine what is happening at title companies and lenders in the days leading up to month end.
If your purchase is cash then you have a smaller risk of running into problems but it is still easier to close earlier in the month if you can.
If you are getting financing to make your purchase (or the buyer for the property you are selling is getting financing), then you should at least try to have your closing as many days before the last of the month if at all possible and it would be preferable to do the closing a week or two earlier than that.
When you have your closing on a financed purchase/sale during the last 2 or 3 days of the month, you may run into issues with your or the buyer’s lender not being able to get information from the title company quickly enough, a longer wait for underwriting at the lender to review the file to give final loan approval, your preferred time for closing not being available at the title company – and other issues that can make things more stressful than needed.
From my experience this can happen with any type of closing but the worst is when you are purchasing new construction from a builder (especially one of the larger builders). They also jam in a lot of closings at the end of the month and, from my client’s experience last month as well as one last year, they are often not able to keep up with the requests to provide information for lenders during this period. In addition, they have monthly quotas as well as construction loan payments that put pressure on them to get deals closed without delays and if you run into any issues toward the end they can transfer the pressure they are getting onto you.
How can you avoid this?
First of all would be to work out how you can make an earlier closing work and do your best to push for that when negotiating the contract. I would say this is definitely a must if you are buying new construction from a builder.
Second would be to make sure that any actions you need to do get done quickly. Delaying the completion of actions needed because ‘there’s plenty of time’ often lead to more problems when you get closer to the closing date, especially when you are getting financing and definitely when you do have a closing date right at the end of the month. When getting financing and you are asked for certain documents, get those to your loan officer or mortgage broker as quickly as possible and make sure you send them exactly what they need.
Your closing should be a happy occasion and something you’ll remember in a positive light. Don’t let it be overly stressful due to the month-end rush by recognizing this as an issue and taking the appropriate actions to make sure your dream doesn’t end up with the end of the month nightmare.