5 Common Snags to Closing on a Home

  • Closing Time

    You might think the trickiest part to purchasing a new home is the price negotiation. But getting a seller to accept your offer doesn’t mean you, or perhaps more accurately, they, are home free. In  fact, according to Florida realtor Pat Candito, what we officially call “closing” – when the sellers receive their money and the buyers receive the deed – typically doesn’t occur until 30 to 60 days after an initial contract has been signed — a  lag time that often isn’t in the buyer’s best interest. “Once you sign a contract, you need to investigate the property to make sure it is what it appears to be,” said Benjamin A. Brin, a California real estate attorney. “Closing has gotten more difficult [since the subprime mortgage crisis].” The contract signing is typically followed by a home inspection, bank appraisal and a title search, which verifies that the person selling the home does, in fact, own the home. During this process, there are plenty of roadblocks a prospective homeowner can encounter. Here, MainStreet looks at the common pitfalls buyers might experience that could delay or even cancel your move-in day. Photo Credit: litandmore
    The home inspector finds cracks in the foundation.
  • The home inspector finds cracks in the foundation.

    One of the first things that happens after an initial contract has been signed is the buyer typically commissions a home inspector to come in and make sure that there are no major problems with the property. Problems might include any sort of maintenance issues, including structural problems, leaks in the roof or even faulty central air conditioning. Should the buyer determine the maintenance issues aren’t worth the price, he/she can back out of the purchase. “During my home inspection I found out the septic tank was in complete failure,” New York resident Michelle Maskaly told MainStreet. “I had to back out of the contract because [the seller] refused to fix it.”   Photo Credit: Justin Baeder
    The bank appraisal comes back too low.
  • The bank appraisal comes back too low.

    After the home inspection, the bank will send an appraiser to formally assess what the house is worth. But the seller has no recourse should the appraisal come back higher than the accepted offer. However, buyers can back out or renegotiate if the bank determines the house is worth less than what they initially were willing to pay. (Incidentally, this happened to my uncle when the appraisal on his Long Island home came back $30,000 lower than his offer.) According to Candito, bank appraisals have become more unpredictable in the years following the subprime mortgage crisis as banks are relying less on local appraisers, which have a better sense of the market. They are also no longer permitted to consult realtors on what similar houses in the area sold for under new mortgage regulations. For the record, my uncle re-entered negotiation, agreed to split the difference, and moved into his new house about a month later. Photo credit:  Bobcatnorth
    You have to verify your income … again.
  • You have to verify your income … again.

    According to Brin, getting a bank to “commit” to a loan is different than having it deliver on the funding.  In other words, expect to jump through several hoops before a lender makes good on the mortgage, even ones that were pre-approved. “Lenders tend to be very bad at communicating,” Brin says, explaining that banks prefer to speak in very general terms. “They’ll say they need you to verify your income, but they won’t necessarily tell you what they need to see.” As such, be prepared to provide a copy of your tax returns, several pay stubs from both past and present employers, asset verification and then some. “If something shows up on a [tax] return that does not match the loan application, the lender will request the last two years’ tax returns for review and might require further documentation after that,” New York mortgage broker Dale Siegel explains. “Worse yet, they might find that there is less income or more deductions and the loan will be reevaluated, only to reject the borrower.”   Photo Credit: Casey Serin
    Your credit report changes dramatically just prior to closing.
  • Your credit report changes dramatically just prior to closing.

    Banks will pull a buyer’s credit report an unlimited number of times during the closing process. In fact, according to Brin, it may be one of the last things a lender does before actually funding the mortgage. If your credit score decreasingly dramatically, you can inadvertently prohibit your loan from qualifying on time, you may not want to purchase the furniture before you have the keys in hand. Photo Credit:   Andres Rueda
    The bank discovers a lien on the property.
  • The bank discovers a lien on the property.

    A lien is a legal claim, or "hold," on some type of property that is incurred when a homeowner uses their house as collateral to pay off a debt. If a lien is discovered on a home, it indicates that the real owner of the property is not the person who you have been negotiating with, but the person who is owed the debt. Obviously, you can only buy from the rightful owner. What complicates matters further is that a lien on a home is not typically discovered until the title search, which follows the home inspection and the bank appraisal. The discovery of a lien can happen last minute in process on homes that are in foreclosure or short sale as title companies, who are responsible for combing through real estate records, will typically wait for a bank’s approval to do their search. Photo Credit:  The Truth About …
    Checklist for First-time Homebuyer’s
  • Checklist for First-time Homebuyer’s

    What do homeowners need to know before they start to close? Read MainStreet’s checklist for first-time homebuyers to find out! Photo Credit:  WoodleyWonderWorks
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