[This week, real estate appraiser, Curbed graph guru, blogger, and podcaster Jonathan Miller considers the contract-to-closing gap.]
I thought I'd share a metric I haven't presented before since I've only been collecting it for two years. It sort of measures the efficiency of the closing process, i.e. the number of days between the contract date and the closing date. I've got a few disclaimers on the chart and it is also broken out by re-sale and new development transactions.
The average length of time between contract and closing is influenced by the degree of difficulty in obtaining financing and the time needed to complete construction or repairs.
New development transactions?The length of time between contract and closing date has fallen precipitously over the past two years and has been hovering at just over a month during the past year, consistent with re-sales which are not subject to construction completion. I think the sharp decline is largely due to the completed construction of new development product in the pipeline. Since the pipeline dried up about two years ago, now there is little time spent waiting for a unit to be completed. In addition, developers have had more time to comply with much more restrictive Fannie Mae requirements than seen before and during the credit boom.
Re-sale transactions?The length of time between contract and close has fallen from as much as 3 months back in early 2010 to about a month in 2012. While mortgage lenders have not eased credit standards in any discernable way, they and all parties in the mortgage chain have gotten better at handling the chaotic bureaucratic process.
While I don't have older data to illustrate an historical norm, my sense is a long term reasonable time frame should be more like 3 weeks, with 4 weeks on the outside. Of course this would not consider any sales subject to the sale of another property.
Conclusion? The mortgage process has become more efficient (relatively speaking) but I still think it remains the most difficult part of any sales transaction.
· Matrix [matrix.millersamuel.com]
· Three Cents Worth archive [Curbed]
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