Don’t Be a Home Closing Casualty
So you found a buyer and received your offer contract, isn’t time to break out the champagne and celebrate? Not so fast. Many factors are still at play that can cause your close to fall through. Make sure you are prepared before you sell your home so you don’t become a closing casualty.
Financing Falls Through
Before the sub-prime mortgage crisis, sellers rarely gave a second thought when it came to their buyer’s ability to obtain the adequate financing they needed in order to purchase a home. In the aftermath of the recession however, this has changed dramatically. One of the most common home sale killers is the failure of a buyer to obtain financing. So, as a seller, it’s important you take the appropriate steps to mitigate this risk. Stick with buyers who have either been pre-approved for a loan or are legitimately offering all cash. While there is still a risk the loan can fall through, buyers with pre-approval have at the very least already undergone an initial credit screening. All cash buyers will sometimes ask for a price reduction in exchange for their firm offer, which while not necessarily ideal for a seller’s profit, this far outweighs the damage having to relist your house can cause. Once you have obtained an offer contract, make sure you regularly check in with your agent as well as the buyer’s agent to ensure the loan process is underway and going according to plan. This way if any problems do arise, you become aware of them early enough to avoid the threat of having to re-list your house after already taking it off the market.
Below Expectation Appraisals
One surefire way to kill a deal is having a lower than expected appraisal. Lenders will only provide loan amounts up to the value of a property, so if an appraisal falls short of your asking price, a buyer’s financing will fall short. If this happens, either a buyer must come up with the difference between the loan amount and your asking price themselves, or you as a seller must be willing to negotiate and accept an amount lower than your asking price. To avoid the risk of this situation altogether, don’t over inflate the price of your home. Should an appraisal come in lower than expected, you can advise your buyer to secure a second appraisal and provide them with relevant information on comparable home sales to justify the value you have set for your home.
Unclean Insurance or Inspections
Title insurance is required by lenders to ensure their loan is secured and they are protected in the event a homeowner defaults. Any prudent buyer or agent will make an offer contract contingent on a clean title report. Before you list your home, obtain a copy of your title report to ensure it is clear of any liens. You also want to make sure there are no errors within the report that could jeopardize the outcome of your sale. Much like the title report, the validity of an offer contract will almost always be contingent on the outcome of a home’s inspection. If an inspection reveals serious issues or necessary repairs, you could not only be on the hook financially for their completion, you could lose out on the deal altogether. Having a pre-inspection completed for your home, or having your agent or a contractor walk through and inspect it for necessary repairs allows you the time to complete them before they become a costly mistake.
Nothing is worse than having a deal fall through at the eleventh hour on your home. While some closing surprises are unavoidable, it’s important you take care of the potential threats within your control.