Tuesday Closing Disclosure, Friday Closing, and a Low Appraisal
Buyers Lena and Omar are under contract at $365,000 with 10% down and a Friday 10:00 a.m. closing. On Tuesday the lender emails a revised Closing Disclosure: the APR rose from 5.875% to 6.125% because a $1,400 origination charge was added, and the loan now carries a prepayment penalty. The appraisal came in at $352,000. Their purchase contract has no appraisal contingency but does have a financing contingency. The seller will not reduce the price. The file also shows a $6,000 seller credit toward the buyers' closing costs, and the buyers have $40,000 in verified funds.
1. Can the closing occur Friday at 10:00 a.m.? Walk through the timing rule and state the earliest permissible consummation date.
Read the worked answer
Two triggers, not one. A revised Closing Disclosure with a new waiting period is required if the APR increases by more than 1/8 of one percent (0.125%) or if a prepayment penalty is added. Here the APR moved 5.875% → 6.125%, a 0.25% increase - over tolerance - and a prepayment penalty was added on top of that. Either one alone restarts the clock.
The clock. The buyer must receive the revised CD no later than three business days before consummation. For CD delivery, business days are all calendar days except Sundays and federal holidays; the delivery day itself does not count.
Counting from Tuesday: Wednesday = day 1, Thursday = day 2, Friday = day 3. Consummation may therefore occur no earlier than Saturday.
Conclusion: the Friday 10:00 a.m. closing cannot happen. The parties should re-set the closing date and the possession date in writing and notify the lender, settlement agent, and movers immediately - do not have the buyers show up Friday and 'sign and hope.'
The waiver is not a shortcut. The borrowers may waive the three-day review only in a documented bona fide personal financial emergency; a scheduled moving truck is not one, and a lender or agent who suggests otherwise is inviting a compliance problem and an unenforceable closing.
2. Quantify the appraisal shortfall and lay out the buyers' realistic options given $40,000 in cash and no appraisal contingency.
Read the worked answer
The arithmetic. When the appraisal is below price, the lender bases the loan on the lesser of price or appraised value.
- Loan requested: 90% × $365,000 = $328,500.
- Maximum loan: 90% × $352,000 = $316,800.
- Shortfall: $11,700.
- Down payment needed: $365,000 − $316,800 = $48,200, before closing costs, minus the $6,000 seller credit.
- The buyers have $40,000. They are short at least $8,200 before closing costs and more after.
Options, ranked by realism.
- Renegotiate. Ask the seller to meet at or near $352,000. The seller's refusal is a negotiating position, not a fact; a second look is worth a written counter.
- Challenge the appraisal. Request a reconsideration of value through the lender with documented comparable sales. Cheap, fast, uncertain.
- Restructure the loan. A higher-LTV program could support a loan near $328,500 (about 93% of $352,000) to a qualified borrower, at the cost of mortgage insurance and possibly a different rate - and a new loan product restarts the CD clock.
- Bring more cash or a gift - a written, documented source.
- Exit through the financing contingency. That is the only contractual door open; there is no appraisal contingency to fall back on.
Do not let the buyers waive the financing contingency or sign an appraisal gap amendment on optimism.
3. What must the agents do now, and what should they not do, to keep the file defensible?
Read the worked answer
Do: document and notify. Put the appraisal and the revised CD in the file, send written notice to all parties of the delay and its cause, and get any change to price or closing date in a signed amendment - an email 'okay' from the seller is not an amendment to the purchase contract.
Do: keep roles straight. The agents do not give lender or legal advice; they coordinate with the lender and the closing attorney and relay facts accurately. If the buyers want out through the financing contingency, the notice must satisfy the contract's notice provisions and be delivered inside the applicable window - check the dates, do not guess.
Do: confirm the credit. Ask the lender to verify the $6,000 seller credit fits the program's interested-party contribution limits, and confirm the credit is still on the revised CD; a credit that gets cut at the last minute deepens the cash gap.
Do not: tell the buyers the CD timing 'probably won't be enforced'; tell them to sign first and fix it later; promise the seller's position will change; or let the buyers make an $8,000-plus decision in a hallway. The reliable chain here is: revised CD → new closing date → written amendment → re-underwritten loan → consummation.