The process of purchasing a real estate most often than not comes with several hurdles that the buyer must overcome before getting to the finishing line – closing. Even after your purchase offer is accepted, some of these barriers can still prevent you from closing the transaction and getting the keys to your dream home if you stumble on them. The result of this is that you will be back at the starting line, feeling frustrated.
So, you need to get prepared for the overwhelming task by arming yourself with the knowledge of the problems that usually serve as stumbling block to closing real estate transactions. This will enable you to prevent or mitigate them, after all, what can go wrong does not really need to.
Here are some of the most common hurdles that can delay a real estate closing and what can be done to avert them.
Real Estate Appraisal Issues
A home appraisal is a necessary step in the process of buying a home if you are obtaining a mortgage. The appraisal is carried out by your lender to determine the value of the home using various methods such as current market values on comparable homes. It is also done to ascertain the condition, location, and other features of the home. Doing this will give the banks assurance that the home is worth the amount you are paying for it.
The appraisal issues that can lead to delay in real estate closing are low appraisal and lateness in completion of the appraisal. If the appraisal on a home is low and you and the seller cannot come to new terms or because of repairs that are required by the appraiser, delay or cancellation is imminent as you will have to start looking for another property.
This is why it is very important for you as a buyer to work with a real estate agent that can be proactive in ensuring that:
- the appraisal is complete in good time;
- the home is appraised properly; and that
- there are no repairs required from the appraisal.
The frustration that usually follows the realization that repairs are required in the bank’s appraisal a few days to the closing date is better imagined than experienced.
Unfeasible Contract Dates
When you are buying a home, make sure the real estate agent representing your interest is experienced and dutiful enough not to agree to unfeasible contract dates in the purchase offer. The agent should make sure that there is an appropriate structure of dates, as choosing non-viable dates can lead to delay.
The closing dates to be agreed upon often depend on the type of financing you are using, the number of contingencies in the purchase offer, and several other variables. If the purchase offer contains unrealistic dates, your agent is duty-bound to ask questions.
Titles/Deeds Defects
The title of a property is one of the most important documents in real estate deals. Hence, there must be clarity in the title of the home you are buying. Some of the title/deeds-related problems that usually arise during real estate transactions include rows over the surveying of the property line, mistakes in the public records, and unknown liens from previous property owners.
The best way to get this right is to work with a real estate lawyer who will ensure you get a clear title. Your lawyer should perform the title search immediately after you have received a purchase offer. There are several restrictions and conditions that come with a title, so you have to be sure of what you are getting.
Getting an unclear title transferred to you can cause a delay in the closing or obstacles when you attempt to sell the home in the future.
The House is Too Much of a Risk
One of the possible reasons why a home can be too much of a risk for a buyer is if the home is not insurable due to some damage or deterioration noticed in it. If this happens, insurance companies may refuse coverage on the home, and this can discourage lenders from giving you mortgage.
Another reason is if the location of the home is prone to natural disasters like flooding. The lender may require you purchase hazard insurance, and this type of insurance can be costly. It’s also a cost you’ll be required to pay every month until the mortgage is paid off or until you sell the house.
To avoid buying a house that is in a high risk area, ask important questions – from your real estate agent, the town planning department, and your potential neighbours about the natural disasters that exist in the area.
Banks Require Additional Documents
When you apply for a mortgage, the lender might require additional documents after reviewing your bank statements and other documents before you receive your mortgage commitment or financing. If this happens early enough, good, but if the additional documents are requested at the last minute, delay is certain.
A lot of time will be lost in the process of looking for the additional documents, getting them to the banks, and having to go through another round of review with the banks.
Finance Related Issues
At times, it is not easy to get a home if you don’t have a written loan commitment from a bank giving assurance that it will provide you with a mortgage. This loan commitment is otherwise known as ‘preapproval’.
Even if you get preapproval, it might be difficult to close a loan if the bank notices some issues in your application. For instance, you may have a low credit score or suddenly experience a change in your employment or job situation. This can cause a delay in real estate closing.
This is why it is good to ask your bank ways to avoid problems when applying for a mortgage.
Required Repairs Not Carried Out or Completed
As a buyer, you are to conduct home inspections to ensure the home you are purchasing does not have any defects that can lead to frequent repairs, major maintenance, or loss of money or investment in the future.
If there are defects, you can enter a repair agreement with the seller. The repairs must be done immediately after you get your mortgage commitment. If the repair is not done before the closing is scheduled or it is not carried out at all, there will be delays in the real estate closing. Your real estate agent is in charge of making sure that required repairs are done on time.
Rejection of Mortgage Buyers
Rejection of your mortgage application for whatever reason can also cause a delay in real estate closing. This means that you will start looking at the loopholes in your application, finetuning it and then reapplying. The process can be herculean and demanding. Doing all this will definitely delay the closing of your transaction.
Issues with Instrument Survey
Every home is susceptible to potential instrument survey issues, the number of times it has been bought or sold notwithstanding. The most common survey issue is an encroachment or boundary dispute with an adjacent property. If this happens, it must be solved before the sale is closed. To avoid unnecessary delay as a buyer, ask the seller to approach the neighbour in question to discuss the situation.
Discussing the issue can give room for voluntary solutions that will meet everyone’s needs at nobody’s expense and without causing delay.
Shabby Last Inspection
As a buyer, you have the right to inspect the home you will soon own for the last time before closing the transaction. If you do not do a thorough inspection and ensure that the property and its environment are in good condition for the last time, there will be a delay in real estate closing.
The last walk-through should be done carefully to ensure that the repairs requested are done, and the air conditioning, toilets, appliances, and other utilities are functioning. Discovering any unfavourable issue after the last inspection will cause delay.
Closing
It is essential to understand that real estate closing does not always happen as and when stated in the purchase contract as a result of delay.
The above are the usual impediments that cause delay and how to avoid or mitigate them so that the professionals involved in real estate transactions can work and walk through the process effectively and efficiently, and you, the buyer can have your dream home at the right time.
