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VOL. 39 | NO. 41 | Friday, October 9, 2015

Tripped by TRID: New rules, big changes in closing home sales

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TRID is upon us. Long live TRID. With the time and money that the industry has invested in crowning this monarch now ruling the real estate closing, the hope is that she will hang around for a while.

TRID is an acronym for a couple of other acronyms and two words suggesting its complications even from its origin. TRID stands for TILA (Truth in Lending Act), RESPA (Real Estate Settlement and Procedures Act), then Integrated and the ever-popular “Disclosure.”

While all loans originated prior to October 4, 2015 are not required to follow TRID (TILA-RESPA Integrated Disclosure) guidelines, lenders warn to expect delays on loans in process since newer loans are falling into the TRID trap and will require more scrutiny, thereby sapping lender resources necessary to work with pre-TRID loans.

Realtors are bombarded daily with warnings from title companies and lenders with offerings of specialized training all hours of the day and night. Not since Y2K has there been such rending of clothes and gnashing of teeth. As was predicted by many in the trade, there are several title companies that have given up and closed rather than opt in.

While it is apparent from the uproar of those behind the curtain dealing with new regulations, deadlines, software and scrutiny, to Realtors and consumers, the main difference in the process is that the closing statement, formerly known as the HUD or HUD-1, is now called the Closing Disclosure or CD, and some of the disclosures that were on the last pages of the HUD now appear on the first pages of the CD.

In essence, the change will have about as much impact on consumers as Y2K had, except that the lenders are at the mercy of the borrowers to meet deadlines.

And the CFTB, yes another one, this being the Consumer Finance Protection Bureau, has implemented the “mail rule.” This is the regulation that is going to prove to be the fly in the ointment.

In order to close, the CD (Closing Disclosure) must be received by the consumer three days prior to closing. The CFTB assumes emails and snail mail travel at the same velocity, taking three days to arrive at the home of the borrower.

Therefore, the CD – formerly known as the HUD – must be prepared and sent at least six days prior to closing.

For those of a curious nature, these days they are completed the day before of the day of the closing in many cases, but rarely – if ever – six days early. Then again, there was no need, and things change at the last minute that could affect the HUD.

By the way, the CFPB does not recognize Fed-Ex or UPS or the USPS in their overnight services.

That “things change” thing is going to be the rub.

Last week if someone went to a walk-through prior to close and found certain repairs had not been made, the buyers could ask for monetary remuneration. Lately, those would be paid in the form of closing costs.

A call to the lender and the HUD is reworked and approved and sent back to the title company. Starting this week, that is impossible.

In many real estate transactions, the owner of one home is counting on that home to close in order to buy another home, thereby creating a domino effect albeit with two dominos, yet it is not unusual to have three or four dominoes.

So the issue is not a question of whether that buyer and his lender did everything correctly and timely, but whether all of the dominoes were handled correctly and that there were no significant changes in the six days prior to closing.

If there are changes, all of the closings must wait six additional days. Merry Christmas from your friends in Washington. Who said they were a “do nothing Congress?”

Sale of the Week

The shotgun-style home located at 1317 2nd Avenue North sold last week for $370,000 with its two bedrooms, one bath, and 1,712 square feet.

The seller had purchased the property in November of 2012 as the market began its return and realized a nice return on her investment. What is interesting is that at $216 per square foot, the price lags behind other properties in the area that sell for as high $262 per square foot.

The lower price per square foot was not due to a lack of effort by listing agent Vanessa Coe of Parks, who originally listed the property at $429,000 some 76 days prior to it selling.

One of the issues with the home may have been that it is not a replica of an historic shotgun home, but an 1899 historic shotgun home with all of the characteristics of homes of that era, even though along the way one of the owners had removed a wall or two in order to allow for an open new kitchen and dining/living area.

John Fairhead of Village Real Estate Services a Realtor with a passion for older homes delivered the buyer to the home that Vanessa Coe described as having a “new roof, paint, flooring, appliances, granite counters, and custom cabinets. New plumbing, wiring, and off street parking.”

She noted that the zoning is unique inasmuch as it is zoned “residential/commercial/industrial and might make a nice AirBnB.”

Even new with everything, including a new steel roof, the price suffered somewhat compared to 1811B and 1813B 3rd Avenue North just around the corner that sold for $263 per square foot prior to completion of construction. These homes have concrete floors, manufactured siding and modern everything. When the choice is something old or something new, buyers are choosing the new.

At least they are paying more.

Richard Courtney is a real estate broker with Christianson, Patterson, Courtney and Associates and can be reached at richard2richardcourtney.com.

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