Closing Escrow & Giving Your Landlord The 30 Day Notice
When a client that’s currently renting decides to buy a place of their own, they’re obligated to give the landlord notice of their intent to vacate, typically 30 days in advance. At what point in the home buying process should the notice be presented? This seems like another of those questions with an obvious answer, but we’re talking about real estate and mortgages here, so as usual, the answer isn’t as straightforward as it appears.
In my 22 years as a mortgage professional I’ve been asked this question hundreds of times and over the years experienced has shaped my response. After about 3 or 4 years in the industry I realized the question shouldn’t solely focus on when a homebuyer presents a 30 day notice to their landlord, but equally important, how should the homebuyer present the notice.
It’s obvious the 30 day notice to vacate should be given 30 days prior to the date by which you’ll fully vacate, but the underlying question is when can the buyer take possession of the place they’re buying. The purchase agreement and escrow instructions call for a specific closing date, often the contract will say on or before a certain date – but there is always certain date cited.
Unfortunately, my experience has been that about 40% of transactions do not close on time. Every deal has a glitch of some sort; sometimes it’s a major glitch, sometimes minor, but there’s always something that must be worked out before a transaction can advance. It’s the nature of the beast.
In addition, unbeknownst to most borrowers, there is an army of people involved in closing a real estate transaction, including:
• Real estate agents
• Brokers
• Transaction coordinators
• Lenders
• Underwriters
• Loan processors
• Regulation specialist
• Document drawers
• Funders
• General inspectors
• Termite inspectors
• Appraisers
• Escrow officers
• Title officers
• Insurance agents
• Notary publics
• Fedex (or a sililar overnight carrier)
• File auditors
• And others …
Generally speaking, everyone has to do a good job for a transaction to close on time, and if a mistake is made, it has to recognized, owned, and resolved as quickly as possible. To no one’s surprise, I’m sure, sometimes this group works like a well-oiled machine, and at other times, well, not so much.
Under the best of circumstances, when human performance is at its peak, and everything is done correctly, on time, to a T, I’ve had transactions fail to close as scheduled. A case in point would be the time we were scheduled to close on a Monday, but over the weekend a water main broke about 100 feet up the street and flooded the entire first floor of the subject property. The flooring had to be replaced and there was extensive drywall damage, etc. With delays for insurance claims processing and repairs, we closed almost 6 weeks later.
Similarly, I once had a lender in Pennsylvania who lost electricity and could not fund a loan for five days because of a snow storm on the Eastern Seaboard. In another instance we were awaiting an original deed that was delayed two days because the Fedex hub in Memphis was shut down due to a massive thunderstorm.
Between humanity’s inclination to make mistakes, acts of God, and a myriad of other unforeseen circumstances, it is wise to leave some room when submitting the 30 day notice. Let the landlord know you are scheduled to close on a particular day, but because of the nature of the transaction, and the possibility that things can happen beyond anyone’s control, you’d like some flexibility relative to the move out day. Discuss this with the manager before submitting the 30 day notice, and regardless of their response, address this in your letter when you give the 30 day notice.
Rest assured, Sidwell works extremely hard to always close on time (see our video, Timing Matters), but Life Happens! Exercise prudence and save yourself some grief. I’d recommend adding 5 – 10 days.
Until the next post … may health and happiness abound!