The most common home closing hurdles are typically avoidable but some will cause a delay or even derail a purchase. When you have your purchase offer accepted, you’ll certainly be delighted to hear the news. But, the house isn’t yours yet. There is more due diligence to be done in the next 30 days or so before the keys are put in your hands. One example is the home inspection. You’ll need to ask your inspector the right questions. While you wait nervously and anxiously, it’s good to be prepared for the most common home closing hurdles.
Common Home Closing Hurdles
In a balanced local real estate market between buyers and sellers, there’s generally approximately 6 months of inventory available. This is the time it will take to sell all current inventory (with no new listings coming on the market). If there is less than 6 months of inventory, like 3 or 4 months, this is considered a sellers’ market. However, if there is more than 6 months, this constitutes a buyers’ market.
When you buy or sell a home, the real estate closing is the final hurdle, the finish line when the property transfers ownership. But instead of a celebratory anticipation of the settlement date, many consumers face the day with trepidation. A well-prepared buyer or seller who has seen the documents to be signed ahead of time and understands what will happen at the closing should feel confident that the transaction will be simple. Most settlements are uncomplicated and take about an hour. —Washington Post
In a balanced market, about 10 percent of all transactions fall through. In a sellers’ market, this figure rises by five-fold, meaning about 50 percent of all transactions will either be delayed or fail to close. To get through the final walk through, there are a number of things which must happen. Unfortunately, some are beyond your control but others can be fixed. Here are some of the most common home closing hurdles which delay or derail deals:
- Red flag inspections. The home inspection and pest inspection are part of the home buying process. The home inspection is done to uncover what’s known as material defects (problems with the house which affect the value and/or compromise safety and/or health issues). If the home or pest inspection reveal big problems, these can either delay or kill the deal. Some of these will be remediable while others won’t, depending on the situation.
- A low home appraisal. Your mortgage lender will certainly schedule a home appraisal to determine the true market value of the house. If it appraises for less than the agreed selling price, you’ll either have to pay the difference or negotiate to lower the selling price. However, if a home appraisal comes in higher than the agreed purchase price, you’ve just struck gold.
- Title clouds or defects. In order to get title insurance, the title company will conduct a title search to look for things like liens. If the title search reveals defects or issues, there will be a problem with passing ownership from the current homeowner to you. Some of these are easy fixes while others pose big obstacles. For instance, an IRS lien will prevent the homeowner from selling until it is resolved.
- The house is uninsurable. While you might like the new bathroom remodel, others could think differently. For example, if the current homeowner filed an insurance claim because of water damage or mold, this will be uncovered on insurance records. That alone can make a house uninsurable which means the financing will be denied.
- There’s a change in your finances. If you change employers or worse yet, change careers, there will probably be a change in your finances and that could spell trouble. If possible, you should wait until after you close and move-in to make such a change.
If you are considering buying a home in Orlando, contact us for the latest market information. We’ll also provide you with the right advice to find a house quickly and for the best price.