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It’s a game changer on August 1. Be prepared. New laws affect home buying and selling.


It’s a game changer in August 1. Be prepared. New laws affect home buying and selling. One of the biggest changes in the real estate industry in a long time is coming in less than a month. This will be challenging and there will be hiccups. The landscape of home buying and selling is changing dramatically. This has been very little reported yet.

For home loans originated on or after August 1, 2015, the home purchase for the buyer and the sale for the seller will be affected – causing a potential doubling in time from the point of going under contract to sitting down at the settlement table.

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The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), enacted in 2010, created the Consumer Financial Protection Bureau (CFPB). The CFPB issued its TILA-RESPA Rule in November 2013. This becomes effective August 1, 2015. The Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z) are in put into place at that time.

There are strictly defined timeframes for disclosure of information to the buyer. This change is meant to make the language of the terms of the loan more clear to the consumer. Secondly, the forms provide more information than in the past. This is designed to help buyers determine that they can actually afford a given loan.

There are two new forms Dodd-Frank is requiring:

1. The Loan Estimate. It includes material/information that has already been available on the Good Faith Estimate (GFE) and the initial Truth-in-Lending disclosure. The Loan Estimate form was designed to provide information to consumers to help them understand the features, costs and risks of signing for the credit they are applying for. Important to note is that for all loan applications filed after August 1, 2015, the Loan Estimate must be provided no later than the third business day after the buyer submits the loan application to the lender.

2.The Closing Disclosure, which combines the HUD-1 (settlement statement) and final Truth-in-Lending disclosure. This form must be provided to consumers at least three business days before closing.

Here’s what Buyers and Sellers will want to know – what this means for you, bottom line.

1. Expect 45-60 days from contract ratification to settlement. In the DC area, 30 day settlements have been the most common. Bottom line: closings will be 50% longer to twice as long as in the past, in general. Big difference in planning.
2. There is the strong likelihood of lender and seller delays, especially at first as the bugs are worked out in the new process.
3. Back to back and coinciding settlements may very well be problematic, and not advisable.
4. There will not be any more last minute changes to the settlement statement. Plan ahead to get inspections done early, repairs done well in advance of closing and do the final walk-thru, instead of 1 day or same day before closing as is most normal in our area, at least seven days before. You will want to know that the buyer and seller are in agreement as to the condition that the home conveys in.

1. To get the best possible negotiating advantage as a buyer, pre-approved for a loan prior to August 1, 2015. Buyers who did not get approved prior to August 1, and are competing for homes in our low-inventory market, will have to show a good hand against your faster closing date!
As a seller, you will have to be prepared to weigh the advantages of a quicker sale against other strong terms if you are comparing contracts in a multiple contract situation. This is trickier than weighing more apples to apples currently.
Being ready and ahead of the crowd of fall shoppers who are not approved will win buyers the homes they want in a shorter time – and even possibly at a better price, if negotiating is done expertly.
And for sellers, having input on the complex process from a real estate consultant will be a strong advantage, so that items and eccentricities are not missed that could cost the seller time and money.
2. Buyer and sellers need to plan more time to make the whole process happen, and will need to have more patience as the bugs are sorted out of the system. An agent to represent you who is knowledgeable in the changes and is patient will be a huge asset to get you what you want in your purchase or sale.

I hope this is helpful. Please contact me with questions or for a free buying or selling consultation. I can refer you to a great lender also.


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