Second quarter sales volume in Sullivan County was up 16% over the 2nd quarter of 2015, and last year was a huge leap over 2014. (Total sales gain for the first half of the year from 2014 to 2016 is 42%!) Right now the Sullivan MLS shows 217 listings “in contract” (all categories, not just residential), which is a huge number and the highest I can recall. Even during the fall peak last year, the “in contract” count hovered between 190 and 200. Gains like these make Realtors smile here, but there’s a downside. The capacity in the ‘system’ — attorneys, home inspectors, appraisers, underwriters, title searchers and surveyors — hasn’t increased to handle the volume. The result is the real estate equivalent of a huge traffic jam that’s frustrating for buyers, sellers and Realtors.
Traditionally here the time from deal to close for a residential purchase using a mortgage has been about 60 days if there aren’t any major glitches like an issue with title that needs to be cleared. Now, it’s running more like 75 to 90 days. There isn’t a single culprit. Rather, every stage of the process is taking a little longer and it all adds up. Some home inspectors are booked 10 to 14 days out. Even a year ago, buyers could generally get a home inspection appointment in less than a week. A year ago, appraisers were booking site visits 3 to 5 days out, and had the appraisal report to the lender 5 days after that. Today, some appraisers are booking about a week out, and the appraisal report has taken as long as 10 to 14 days to get to the lender. Appraisal review and underwriting approval that used to take 3 to 5 days is now stretching to twice that with some lenders. Title and survey is another bottleneck. Then on top of it all are the new TRID (TILA-RESPA Integrated Dislcosure) that govern mortgage transactions, and can delay a closing up to a week.
So why isn’t capacity increasing to keep up with the need? The biggest reason is that younger people aren’t entering the real estate support service professions in any large numbers, at least here. For example, I’ve only seen one new appraiser here in the last 4 or 5 years. Same thing with surveyors. There are a few new home inspectors here, but that hasn’t kept pace with the number who’ve retired. On the attorney side, there are only two I know of that have hung out their shingle over the past few years, while over the same period at least a half dozen have retired or passed away. Even if new people wanted to enter these fields, the ramp up isn’t instant. All require extensive training and licensing, and in some fields the state has increased the licensing requirements. So there’s no light at the end of the tunnel, at least in the near term.
So what does this mean for buyers? If you’re using a mortgage, you need to think through the mortgage and closing timing, particularly when to lock your rate and for how long. Generally the longest rate lock you can get is 60 days, and if the rate lock expires before you can close, you may end up paying a hefty rate lock extension fee. If you need to close quickly (and quickly is realtive), talk with your attorney about moving tasks, like title and survey, up in the process, rather than the more normal sequential timing. Consider taking a weekday off for your home inspection if you can get an appointment, Don’t get fixed on the closing date in your purchase offer or contract; it’s an ‘on or about date’, and in the current environment, is more likely than not going to be pushed out. But above all, you need to be patient, because there’s no easy fix or way to speed it up.