The way some people talk, it would take a miracle to make it from a signed purchase agreement to the closing table. But in reality, most real estate transactions go through with nary a hitch. Those that do hit snags, however, run the very real danger of completely falling apart.
The problems are sometimes out of the control of all parties. More often than not, though, there are ways to handle them that won’t result in killing the deal. Whether you are the buyer or the seller, read on to learn how to keep the deal alive.
1. Messing Up the Mortgage Approval
The number one reason deals fall apart is because the buyer unknowingly sabotages the loan. A good real estate agent or loan officer will warn the homebuyer about this pitfall. Sadly, many don’t, which is why this is such a common deal killer.
Here’s the scenario: Mary is approved for a mortgage and the transaction is sailing along toward closing. One day, she sees an ad for an appliance package with reasonable monthly payments. She’ll need to purchase these items when she becomes a homeowner, so she goes on a shopping spree to equip her new kitchen and laundry room.
What she hasn’t been told is that the lender will most likely do what is known as a “soft pull” of her credit report prior to closing. Lenders do this to ensure that nothing has changed, and that the buyer still qualifies for the loan. Mary’s shopping spree changes her debt-to-income ratio enough that she no longer qualifies for the loan. Unfortunately, fixing this problem will take time and money.
Another way to mess up your mortgage approval is by changing jobs. Don’t make any major purchases or life changes until the loan closes.
2. HOA Headaches
If you are purchasing a home managed by a homeowners association, it’s important to get the HOA docs as soon as possible after the purchase agreement is accepted. You are entitled to a slew of informative documents about the association and the community, including meeting minutes, the budget, the CC&Rs (covenants, conditions and restrictions), and more.
Items that can potentially derail the deal include a lien against the property, current litigation against the association or the builder, too many tenant-occupied units, or problems with the association’s budget. The more time you have to peruse the documents – or have your attorney go over them – the sooner the problems will become apparent. If a deal is going to fall apart, it’s better to have it happen at the beginning, rather than just before closing.
3. Unrealistic Expectations
It’s safe to say that if you’re purchasing an existing home, it will have problems – maybe big ones, maybe small ones. To expect otherwise is unrealistic. The ideal situation is to find a home in which the problems are small and common, relative to the property’s age. You won’t know everything that’s going on with the house, however, until you have it professionally inspected.
The inspector has a duty to report anything he or she finds, from a loose doorknob to major water damage. The former is a function of normal wear and tear, while the latter is a deal killer, if the seller won’t repair it or offer a credit so the buyer can have it repaired. Be realistic in your repair or replacement requests, otherwise the deal may fall apart.
Both parties in a real estate deal dread its possible derailment. The biggest reasons a deal falls apart, however, can be avoided by slowing down, thinking clearly, and having realistic expectations. Heed the advice of your real estate agent or attorney, and all should go smoothly.