Due to the time needed for booking, clients of small banks could experience settlement delays.
These delays aren’t experienced by all clients of small banks: if everything in a settlement goes to plan, the use of a smaller lender generally doesn’t cause any issues.
However, if for some reason the bank isn’t ready to book until very close to the settlement date (for example, if paperwork wasn’t returned to them promptly), we may encounter trouble getting the settlement booked in time.
The reason for this is that unlike the larger banks, some small lenders require three to five days to book settlement.
Because clients only have three days’ grace after the scheduled settlement date, this three-to-five-day booking period could push them into having to pay penalty interest to the other party. Depending on the price of the property and the total time delayed, that penalty interest could cost hundreds of dollars – or more.
If you’re an agent, you can help avoid such delays by explaining to buyers and sellers that some smaller lenders require three to five days to book settlement. Clients would do well to stay on top of their bank and ensure the bank is ready as soon as possible after finance is approved, to account for the time required to book settlement.
Image by Pete Zarria via Flickr.