For someone who is selling a piece of residential real estate, negotiating an offer and scheduling a closing can feel like a major relief. They finally know how much money they will have for their next property and when they will need to move out of their home. For someone who is buying a house, an accepted offer means that they will know what their mortgage payment will be and the school district where their kids will be placed.
However, none of these details are actually official until the closing takes place. Frequently, issues arise between when a seller accepts an offer and when the closing should occur. These are two common issues that prevent this critical transaction from occurring.
A bad appraisal
With market prices fluctuating to reflect supply, demand and interest rates, neither sellers nor buyers really know with confidence what a property is worth. Lenders require appraisals to protect the company from over-extension on specific mortgages caused by buyer enthusiasm. An outside professional has to look at the property and validate that it is worth the sale price.
A buyer might make what they think is a reasonable offer, only to have an appraiser submit an estimate far below the agreed-upon sale price. A substantial appraisal gap could mean that someone can’t get financing and therefore has to cancel the closing.
Issues with the property’s condition
There are several ways in which issues with the property could derail a closing. Most buyers will have a professional inspect the property for undisclosed defects. The inspection process could lead to a professional uncovering issues that the buyer and their agent didn’t notice during the walkthrough.
Even if the inspection report doesn’t show any significant latent defects that would alter what the buyer thinks the home is worth, there could be damage that occurs between the inspection and the closing. The final walkthrough before the document signing could turn up broken windows, damaged flooring or removed fixtures. When the property’s condition does not align with what the buyer expected, they may attempt to renegotiate and may sometimes even cancel the closing.
Learning more about the challenges that can impact residential real estate transactions can benefit both parties involved in such sales and the agents that represent them. When it comes to real estate, being proactive and informed is key.