Some real estate transactions seem to go off without a hitch, while others just keep hitting snag after snag. For home buyers, any sort of hiccup can be stressful.
Fortunately, the majority of setbacks can be prevented or overcome with some persistence. Here, we review what can go wrong when buying a house and suggestions to keep a home purchase on track.
1. Missed Deadlines
The real estate sales process can be quite long. It’s not uncommon for a deal to stretch out two months after an offer is accepted. During that time, there’s plenty of opportunity for missed deadlines. As a buyer, make sure you are aware of all major dates and milestones pertaining to your contract. Hiring a competent real estate agent who can help orchestrate the various parties involved will keep your deal on target. With so many moving parts, sometimes missing a deadline is inevitable. If a deadline is tied to a key term of your sales contract, be sure to have a document recorded detailing any changes to the timeline. It’s better to get an extension in writing than to fall out of contract.
2. Bad Home Inspection
Buyers can perform many types of inspections, and receiving an unsatisfactory report is unsettling. Some defects are easier to work through than others. For instance, determining a solution for a broken doorknob is straightforward. It can take a lot of negotiating when major defects are discovered, like a leaky roof or shifting foundation. If you and the seller cannot get on the same page about concessions, you reserve the option to walk away. However, what if you really love the house? It’s always best to schedule your home inspection as early as possible so that you have additional time to investigate any red flags that crop up. Sometimes you need to get a few opinions to weigh the risk before you can make a sound decision.
3. Mortgage Problems
The majority of home purchases are contingent on a mortgage. Before you home shop, you’ll want to get a pre-approval letter from a lender who checks your credit and verifies your documentation to be approved for a specific loan amount. A pre-approval can put you at ease, but it’s not a bulletproof commitment. There are many ways financing can go sideways. If your FICO score takes a nose-dive or you decide to switch jobs, you might derail your loan. It’s important to keep your finances status quo during the home buying process and be in contact with your lender about any changes.
4. Appraisal Comes In Low
Financing can also fall through if the home does not appraise at or above your proposed purchase price. As part of the lending process, the bank will send out an appraiser to determine the fair market value of the property based on recent sales and comparable market data. Because lenders will only provide a loan amount up to the appraised value, a low appraisal can wreak havoc on your purchase. There are a few ways you can solve this problem and move forward by negotiating a reduction on price, coming out of pocket to cover the difference, or reconfiguring your financing.
5. Title Issues
Title issues can be one of the biggest threats to a sale. During a transaction, a title examination is performed on a property to verify that all prior mortgages, judgments and liens have been paid in full. The examiner reviews all public data as well as deeds, wills and trusts to ensure the title has passed correctly to each new owner throughout the home’s history. Sometimes a title search uncovers potential issues that cannot be cleared up in a timely manner, such as easements, lawsuits and claims by prior undisclosed heirs.
Title companies and/or attorneys do the bulk of the remediation work behind the scenes, and most title issues can be cleared through common forms.
No matter how small the problem may be, it should be resolved for you to receive clear title. Title companies and/or attorneys do the bulk of the remediation work behind the scenes, and most title issues can be cleared through common forms. Moving beyond the sale, a title insurance policy will be your best protection against any problems that may surface after your transaction is closed out.
6. Cold Feet About Buying a House (Or Selling One)
Sometimes everything is moving along swimmingly, but then someone gets cold feet. There is nothing worse than arriving at the closing table to find that the other party is a no-show.
It’s not unheard of for a buyer to have a change of heart mid transaction, but since purchase contracts are binding, a buyer risks forfeiting his or her earnest deposit money in the process of pulling out of the deal. If you’re having second thoughts about a home you have under agreement, you’ll need to strategize with your real estate agent and/or attorney on ways to cancel the deal.
What if a seller decides to back out? The whole point of having a written contract is to hold people accountable. So, what recourse does a buyer have when the seller suddenly changes his or her mind? Depending on how your contract is written, you will likely have legal options to collect damages or compel the seller to close the deal. Litigation can be a drawn-out process, so buyers faced with this situation must determine if it’s worth the time, energy and costs.
7. Selling and Buying a House at the Same Time
Trying to put a new home under agreement contingent on the sale of your own home is tricky. One approach to avoiding this situation is selling your home and then securing a rental while you home shop for your next property. If this isn’t a possibility, you’ll want to negotiate ample time to close so you can list and sell your current residence. Be careful when writing up contracts, paying particular attention to the contingencies and associated deadlines. These contingencies protect you from losing your deposit money, and it’s important to know when your money goes hard. Of course the cure for most relocation delays is time. If you need more time to tie up loose ends, you can request an extension from the seller, which he or she may or may not grant.