Residential real estate transactions typically take weeks to complete. They begin with the seller listing the property on the open market. The buyer makes an offer. Both parties negotiate the terms of a purchase agreement.
From there, there may need to be inspections and appraisals performed. A title search is usually necessary, and professionals draw up the final documents for the buyer to sign at the closing table. Unfortunately, things can go wrong between when the buyer makes their initial offer and when they sign the final paperwork.
In some cases, the closing is delayed. Other times, issues may arise that result in a canceled transaction. What sorts of issues might impact a scheduled residential real estate transaction?
1. An appraisal gap
Buyers often try to make the most competitive offers they can. They offer a high price to attract the attention of the seller and stand out from multiple other prospective buyers.
Unfortunately, the lender financing the transaction may not agree with the buyer’s assessment regarding the property’s value. In some cases, a significant appraisal gap makes it necessary to renegotiate closing terms. Other times, the lender may refuse to finance the transaction, forcing its cancellation.
2. Inspection or walk-through surprises
Buyers typically expect to receive a property in reasonable condition based on their tour or viewing of the property and the disclosures made by the seller prior to closing. Unfortunately, sometimes professional inspectors turn up latent defects that affect the value of the property and the buyer’s interest in it.
Other times, buyers and their agents may notice concerning property issues when performing a final walk-through prior to closing. They may either need to renegotiate the price, arrange for the seller to make repairs or cancel the closing.
3. Financing issues
Personal circumstances can change abruptly. One of the buyers might suddenly lose their job. The buyers might also overextend themselves using credit cards as they prepare for closing.
When their lender pulls their final credit report prior to funding the mortgage, they may determine that the buyer no longer qualifies. Financing issues can also relate to concerns about the condition of the property or problems with the title history. If the buyer cannot secure a mortgage despite having pre-approval, they may have to cancel the closing at the last minute.
Throughout residential real estate transactions, the right contract terms and professional assistance may help mitigate much of the risk. Preparing for potential pitfalls can help both buyers and sellers as they prepare for a residential real estate transaction.