Buying and selling real estate can be a stressful process for many. There are the constant showings, researching, offers that get outbid, the prospect of moving. When you do get a property under contract, many people, especially first-time homebuyers, do not know what to look out for.
Here are the top 5 reasons the sale may not close.
1. Title Issues: Complications with the property title, such as liens or unresolved ownership disputes, can delay or derail a closing. Title issues get revealed in the title search. Perhaps there is a Lis Pendens on the land records because there is a property line dispute in court, or a deceased spouse’s name still appears on the deed. These must be addressed to clear title and satisfy the title insurance company, or the buyer runs the risk of taking on unforeseeable costs and liabilities. Often the closing attorney is able to address these on a timely basis, but sometimes they cannot be resolved and the sale does not close.
2. Financing Issues: Buyers may struggle to secure a timely mortgage or face last-minute financial challenges, like changes in credit scores, debt-to-income ratios, low appraisals, not enough cash to close, or a change in employment, or taking on new debt. All of these could impact a buyer’s ability to secure funding. If this happens, the mortgage contingency date is often missed, which can be extended or terminate the Contract.
3. Inspection Problems: Major issues uncovered during a home inspection (e.g., roof damage, mold) can lead to renegotiations or the buyer walking away. Usually sellers will either address these or negotiate them with a credit to the buyer. They can cause delays in the closing, and occasionally they result in the contract being terminated, depending on the severity of the issues uncovered.
4. Contingency Failures: If contingencies (e.g., sale of buyer's current home, repairs) are not met, the sale can fall through. Contingencies are the legal way real estate contracts are terminated and deposits are often returned. We have discussed financing deadlines and inspection issues, and there is a third contingency of buyers selling their homes, referred to as the Hubbard Clause.
5. Closing Costs Discrepancies: Unexpected increases in closing costs or disagreements about who pays what can create conflict. Lenders are required by federal law to provide a Closing Disclosure at least three days before the closing is finalized. Buyers are encouraged to address any issues immediately upon review.