Nothing kills your home sale buzz faster than a pitfall that brings the whole transaction tumbling down. Unfortunately, it’s not uncommon for a home sale to crumble during the closing process.
There are several things that can go wrong from buyer’s remorse to buyer-financing rejections but lucky for you there are things you can do ahead of time to avoid issues before they crop up and power through them if you have to. Here are the five most common reasons home sales fall through during escrow and what you can do to save it.
Financing Problems
Lenders have significantly tightened their standards since the housing bubble burst and while things are starting to ease, a borrower’s ability to repay a loan is still intensely scrutinized. In fact, buyer-financing troubles is probably the #1 home sale killer these days.
What you can do:
Work with a buyer that’s preapproved. While it is still possible for a preapproved buyer to get rejected, it’s not likely. A buyer who hasn’t gone through the initial credit screening could easily be turned down based on their qualifications or the size of the loan they’re seeking. Also, a cash buyer who doesn’t need financing is a sure thing.
A Low Appraisal
Once you’ve secured a buyer and decided on a price, the home must be appraised to determine if the lender is wiling to finance that particular piece of real estate for the price offered. A certified, state-licensed professional will appraise the property and if it’s lower than the offer price, there’s a problem. A buyer’s lender will only lend funds up to the value of the property so if the appraisal comes in low, then your buyer may not be able to afford the home anymore.
What you can do:
To avoid the problem, price your home right the first time. Work with an agent who knows the area and where values stand and be realistic about what to expect. If you’re already in the middle of your home sale, then that means it’s time to negotiate and power through it. That could mean negotiating a lower price the buyer can afford or securing a second appraisal that could come in higher for the buyer. If you can, supply the appraiser with evidence of a similar home sold at a similar price to make a case for a higher price.
Title Surprises
It’s the buyer’s job to purchase title insurance to ensure the home is fully theirs to buy and secure a home loan. If a homeowner defaults on the loan and a faulty title reveals that the home is not actually theirs, the bank has no way of recouping the money it lent. You should be aware of any liens on the property but a title report could drudge up long forgotten, past problems. A title search will look to see that all past mortgages and liens have been paid, check pending legal actions, easements and more.
What you can do:
Get your own preliminary title report in advance to make sure the property is fully in your possession with no legal threat of claims. The peace of mind that your home sale will run smoothly is worth it.
Home Inspection Shockers
Your buyer will want an inspection and most likely needs one as a part of the loan process. As a seller, you should never be waiting for problems to turn up – you should be aware of all past and present issues with your house including termites, water damage, mold and more. If your home has problems, they should be fixed before you list or disclosed to potential buyers.
What you can do:
To avoid any surprises during the home inspection, get one done before you list your home. If you’re already in the middle of your sale, however, get ready to negotiate. If the home inspection brings up issues your buyers could ask you to lower the price or to pay for repairs before closing. You want to negotiate with the buyer before inspection issues scare them off.
Contingencies based on your buyer’s home sale
It is a common buyer contingency in an offer to make the purchase of your home contingent on the sale of their own. It’s because most buyers need equity in their current home to purchase a new one. However, as you know now, there are plenty of reasons a sale could fall through.
What you can do:
Target buyers who have already sold their home or who aren’t relying in their current home equity to help buy yours. This is also a good reason to choose a cash buyer; they generally have little to no contingencies in their offers. However, keep in mind that cash buyers will always offer a lower price than a financing buyer.
