Jumping Hurdles: Obstacles to ClosingApril 28, 2016
Closing on a home isn’t always as easy as 1-2-3. It takes time and there are plenty of obstacles you may run into along the way. Just as a marathon runner trains for the big race, you can train for the obstacles you may encounter during a closing. Here are a few of the most common obstacles you may face and what you might be able to do to prevent them.
It’s common for a buyer to put in an offer with a contingency based on the appraisal coming back at a certain amount. The lender will get an appraisal ordered, but if it comes back too low, it could become an obstacle to closing. When an appraisal comes back too low, the seller may have to lower their price or the buyer will need to pay cash for the difference. Of course, you can always get a second opinion on the appraisal.
Financing Falls Through
Smart buyers will get a preapproval before submitting an offer on a house. However, there are times when it cannot be prevented and the financing falls through. Maybe you lied on your application, the interest rates increased, your credit score changed or your job situation changed. The best thing you can do to avoid this obstacle is ask your lender how to avoid these issues.
Home Inspection Comes Back with Major Issues
A home inspection is usually required by the mortgage company, but a smart idea for all buyers. Sometimes, you make an offer and the contingency is the home inspection coming back clean. However, it may come back with major issues you’re not willing to deal with as the buyer. This may send you back to the negotiating table for a lower price or you may ask the seller to handle the repairs before you by the home.
This obstacle to closing cannot really be avoided, but you can protect yourself. When you make an offer, make sure a home inspection contingency is included to protect your earnest money.
Title Comes Back with Issues
Before closing, you will pay for a title company to perform a title search and give you title insurance. This helps to ensure you don’t buy a property with claims from the IRS or another party now or in the future. If there is a lien or claim on the home, it will need to be resolved before you can close on the home.
Many other obstacles may prevent or delay you from closing on the home you’re trying to buy. It’s always a good idea to hire a skilled real estate agent to ensure any obstacles to closing are properly handled during the transaction.