Buying or selling a home is a high-stakes transaction with many pitfalls along the way – dates, deposits, deadlines, and legal jargon. It’s often a high-stress period for both buyers and sellers when problems arise. Home prices continue escalating, and any obstacle preventing deal closure either crushes the dreams of a buyer or kills the profits of a seller, not to mention actually affecting the living situations of everyone involved. Here are some common real estate roadblocks that happen here in Boston and a few ways that you can handle them to ensure your deal closes.
Title Report Problems
It is possible that when the title report is pulled, there is an issue with the title from the long chain of property owners that preceded your seller – something that the owner wasn’t aware of. Most title issues have to do with public easements or zoning issues. These are generally not an issue unless it significantly affects the home. For example, if there is a public easement for a road through the middle of the property, this could significantly reduce the price of the home, especially if the road has just been approved for paving.
What is more problematic in the title is a title lien. If the house is upside down in value, there will not be enough in sale proceeds to cover the debt. The homeowner will need to get approval and make arrangements with the lenders to remove the lien.
Another issue is a mechanic’s lien put on the property because a contractor is owed money. Mechanic liens need to be satisfied or disputed in court to be removed. It might take some time to resolve a mechanic’s lien, but it is usually manageable.
Inspections: The Nickel-and-Dime Process
The start of escrow might be the start of seller’s stress. Why? Because inspections might yield problems that the owner is honestly unaware of.
Buyers have options on how to proceed once inspections are complete. They can walk away without penalty. They can accept the house as-is and continue. Or they can negotiate a reduction in price or credits in escrow.
If your inspection reveals major issues with the home, such as a foundation in disrepair or other structural problems, think about what recourse you have. Did the seller factor this into the listing price already? Or is this an additional cost that will cause you to want to renegotiate your offer? Has the property been on the market for some time and the sellers are willing to entertain a price reduction as a result of the inspection? Or, is the market overheated and multiple similar offers are waiting to grab the property agnostic of the issues if you back out?
While every inspection finds something wrong, even in new construction, some items become more stressful than others. Imagine finding a foundation issue in your home you were unaware of. If you are selling an older home and have concerns about inspections, it might be wise to conduction your own inspection prior to listing so you know what to expect and can actually disclose it, factoring the repairs into pricing.
Bad News from the Appraisal
There are times when the real estate market is so hot that prices go well above what the home is worth. This is great for sellers who want to maximize profits. It might be perfectly fine with buyers who see the value of the home. This isn’t, however, okay with lenders who take the majority of financial risk in the home purchase transaction.
If the contract price is $400,000 but the appraisal is only $380,000, lenders will not lend for the full amount in most cases. They will cap the loan at the appraised value of $380,000, possibly less any down payment. If the buyer wants to proceed, he must either negotiation the lower price or come up with cash to bridge the gap between the appraisal and the sale price.
In hot markets with bidding wars, this isn’t entirely uncommon. Appraisers tend to be conservative with their valuations in order to avoid any future litigation, and the basis of their values is with homes that have closed in the past for months (meaning, their sale prices were negotiated months before the close dates and might noticeably lag behind the current market if things are super heated.)
Not Getting Funded
One of the most frustrating things for lenders is to have a loan not get funded because clients decided to do something dumb. Days before final funding, the lender will re-run credit. If the borrowers have opened new credit accounts to finance furniture or a new car, credit might be denied. New credit could affect credit ratings and debt-to-income ratios. If the loan was on very tight razor-thin margins, it might not fund.
Get a real estate agent prepared to walk you through the real estate process reducing stress by foreseeing any obstacles. At NextHome Titletown Real Estate, we’re here to help you succeed. Send us a message, or call us today at (617) 657-9811!
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