Big changes are coming to the closing process this summer, and while lenders and attorneys have been scrambling to get ready, it’s real estate agents who may be facing the brunt of the practical effects—yet they seem far less tuned in to what’s coming.

“Particularly right now in the midst of the spring market, agents are really working in their business,” said Wendy Wagenbach, director of professional education for Coldwell Banker Residential Brokerage. “They kind of  know something’s coming, but they’ll wait until it happens to worry about how it’s going to affect us.”

But that could be a mistake. The real estate industry’s favorite regulator, the Consumer Financial Protection Bureau (CFPB), has been re-writing and consolidating the closing documents required by the federal Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) for several years now. Its new forms are finally complete and will be required for any loans closing on or after Aug. 1.

The underlying philosophy behind the so-called TRID (for TILA-RESPA Integrated Disclosure) changes is that consumers should “Know Before [They] Owe” — that is, that they should be given several days to review the loan documents prior to the actual closing to make sure they understand all the fees and charges they’ll be agreeing to pay at the table.

The problem, from an industry perspective, is that there are often last-minute changes to those fees and charges, from updated calculations for heating oil and water bills to last minute shifts in loan rates and points.

Under the new rules, if there’s a change in the annual percentage rate being charged, or the buyer is shifted into a different loan product, or the lender wants to tack on a pre-payment penalty, a new set of closing documents must be issued and the buyers given a fresh three-day period to review them.

Other, less significant changes require the lender to give the consumer a revised set of forms to reflect the new numbers, but don’t require an additional wait period. Lenders who fail to issue a fresh set of forms and give buyers enough time to review them face stiff penalties.

That’s going to be a huge shift from current practices, when many documents are rushed to the closing table practically with the ink still wet. With the penalties for non-compliance so steep, many industry observers think it’s likely that many lenders will go ahead and issue the new forms and give the buyers an additional three days for review even when the fee changes are minor. And that means one thing for buyers and their agents: an upsurge in delayed closings.

The Massachusetts Association of Realtors (MAR)  is reviewing and revising its own standard purchase-and-sale agreement form in order to account for the possibility of a closing delay and lay out the legal obligations of the buyer and seller in the event one occurs, said Michael McDonagh, general counsel for MAR.

While the bulk of the tricky adjustments to contract language will fall on the shoulders of the real estate attorneys reviewing the transaction, brokers need to make sure they’re providing conveyancers with as much information about the property as they can as far in advance as possible, he said.

“A lot of the [tasks] that used to be done a day or two before closing are going to need to be done a week or 10 days before closing. And I think that’s a change in culture,” McDonagh said.
Scheduling back-to-back closings could be a particularly risky move, he said.

“Any delay in one closing will impact the other. That’s one thing our members really need to be cautious of, to advise their buyer and seller clients that that could be a problem,” he said.

Best practice may be to stagger closings days apart if sellers are still in residence, to allow for longer lead times in general, and to try and to make sure to give buyers a little wiggle room if they’ll be leaving a rented property to move into their new home.

There are some options for buyers and sellers if a closing is delayed at the last minute. Signing a temporary Use and Occupancy Agreement can allow the move-in to occur even if closing itself is put off for a few days, said Richard Vetstein, principle of Vetstein Law Group in Framingham and author of the Massachusetts Real Estate Law Blog.

But such agreements do require a degree of trust between the parties—while a Use and Occupancy agreement merely offers the buyer a brief license to the property and doesn’t grant them tenant’s rights, should a deal turn completely sour and fail to close it could provoke a costly court battle, Vetstein admitted.

“Even in this most clear-cut situation, which this would be, it still can take a couple months and couple thousand dollars if that occupant doesn’t want to leave voluntarily,” he said.

That’s not the only possible risk posed by delayed closings.  In this kind of a strong seller’s market, “there may be some sellers out there who will say… the heck with you, I’ll go get $20,000 dollars more if I put it out to somebody else,” said Sam Schneiderman, principal broker of The Greater Boston Home Team and president of the Massachusetts Association of Buyer’s Agents.

Come this summer, agents will need to do a lot more hand-holding with their clients and negotiating with the counterparts to prepare them for delays and keep deals together.

“Agents aren’t lenders, and they don’t need to that job. But they do need to be aware of this and make sure they’re on the same page as everyone else.  That’s the number one way we’ll be able to have smooth closings,” Wagenbach said.