Whew. The buyer and seller both signed the contract, so that’s it, right? The house is sold, and everyone moves on. Not so fast. There’s still a long way to go.
Unfortunately, sometimes real estate transactions that start out smoothly can unravel for any number of reasons. However, when you’re aware of the problems that can occur, you may be able to avoid them. Here are a few to watch for and possibly avoid.
The buyer changes his mind
The residential contract includes a termination option, which allows a buyer to get out of the contract for a certain number of days. The buyer pays for this option, and the amount paid as well as the number of days are negotiated by parties to the contract. During the option period, the buyer can terminate the contract for any reason – or for no reason at all. They may get cold feet, change their mind, find a property they like better or learn something about the property that they didn’t know when they negotiated the contract.
An inspection reveals bad things
Speaking of learning additional information about a property, most buyers hire a professional inspector to examine the home and identify problems. Most of the time, this inspection occurs during the option period. If an inspection turns up something significant, the buyer may decide to exercise their option or they may decide that they still want to proceed. They also may attempt to amend the contract, either by changing the price or by getting the seller to make repairs at the seller’s expense. Obviously, this introduces elements that can disrupt the transaction or end it altogether.
Financing isn’t available to the buyer
It’s not enough for a buyer to tell the seller how much they will pay for the home. The buyer must prove that they are able to pay that much. If the purchaser isn’t paying cash for the property, they will need a mortgage. And if they can’t get that financing, that’s a deal-killer. What happens when a buyer cannot secure a loan depends on how the contract was filled out. In some instances, the buyer may be on the hook for the earnest money – sort of a good-faith deposit – they paid. In other cases, the buyer will receive a refund of their earnest money.
The home isn’t worth the purchase price
Even if a buyer can qualify for the loan amount, the property may not. That is, most lenders require an appraisal of a home prior to making a loan. The lender wants to know that the collateral for the loan – the property itself – is actually worth the purchase price.
Title problems derail the process
Some homes have title problems that can grind a transaction to a halt. Perhaps there’s a lien on the property or an easement that affects the quality of life of the property owners. There may even be a claim that the person selling the home isn’t the true owner after all.
And another thing …
As you can see, there are many ways a promising real estate deal can crash and burn. Add the following to the list above: agreed-to repairs that the buyer deems unsatisfactory or incomplete; a surprise during the final walk-through of the home, such as an item that was supposed to convey that is no longer in the home; a sudden request right before or at closing; and plain-old default.
Whether you are a buyer or seller, your Realtor can help you avoid these scenarios and give you good advice when a potential deal-killer does arise. Sometimes, he or she may suggest you turn to a lawyer, inspector, engineer, or other professional for assistance; other times, he or she may be able to put things back on track with a phone call or two. Either way, it’s nice to have someone on your side to help you achieve your goal of buying or selling a home.
For more information, please visit HAR.com.
Marla Lewis is 2021-22 President of the Houston Black Real Estate Association (HBREA)..