Real estate transactions, including buying or selling a Waterloo Region home, are far from easy. Buyers spend hours and hours looking for their dream home in order to be able to pay a large sum of money to make it theirs. Even if you put together a strong offer, and it's accepted, it doesn't guarantee the deal is done.
On the other hand, things could still go wrong if you've been attempting to sell your property and accept an offer. An accepted offer does not guarantee that the transaction is complete.
What's the good news? According to CREA's most recent data, only 3.9 percent of real estate contracts failed for any reason, implying that 96.1 percent were completed successfully. Here, we'll look at how home sales might fall through at various points of the process, as well as some reasons why.
The odds are in your favor if you've accepted an offer to sell your property, or you have closing scheduled on your dream home, and it's under contract. Even still, when it comes to avoiding becoming a statistic, knowledge is power.
Common Problems That May Delay a Home Closing
Issues with Financing
To close on a home, you'll need mortgage approval unless you're paying cash. So, what stands in the way of a home buyer receiving final approval? Two of the biggest causes are:
You made a large credit purchase: When you get pre-approved for a loan, you must exercise extreme caution when it comes to your credit. Pre-approval and then spending a few thousand dollars on a new car raises a major red signal for lenders. That's more debt, which means less money will be available to repay a mortgage loan.
You requested additional credit: Lenders may be concerned about significant purchases, but requesting for extra credit puts them into a tizzy. Applying for more credit not only lowers your credit score, but it also tells lenders that you're not sure you can afford this mortgage.
Solutions: Large credit purchases are sometimes unavoidable. They aren't always going to keep you from getting final mortgage approval. If you're in a tight spot, you might offer the seller additional money up front as a down payment to make up for what the lender won't, or you could look for a different bank or mortgage lender. (However, the latter option will result in more delays.)
Home Appraisal Issues
If a lender receives an appraisal that values the home at less than the agreed-upon loan amount, the process may be slowed. Lenders will not authorize loans for amounts greater than the appraised value of the home.
If an appraisal is too low, you can ask the seller to reduce the asking price so that your loan isn't canceled. If you're up against other buyers, you could offer to pay more money up front to make up the difference.
Home Inspection Issues
Smart buyers, however much they want a home, order a formal home inspection. And some mortgage lenders will insist on one as well.
That's because home inspections are supposed to discover a wide range of issues with the house that could affect its value that may not be immediately visible (or fully disclosed.)
Closing may be delayed if a home inspection uncovers a few issues and the buyer and seller cannot agree on who should pay to correct them. For example, if an inspection reveals that the roof has to be replaced, most sellers will not want to invest that money in a home they will be selling. Similarly, a buyer will not want to move into a home only to have to replace the roof soon after. The deal could be jeopardized as a result of this.
Solutions: If a lender threatens to revoke your mortgage approval owing to the findings of an inspection, you can urge the seller to correct any issues before proceeding. However, in a competitive market, this could cost you the house. Instead, you may agree to take care of the repairs once you've moved in to provide the seller an extra reason to sell to you. However, you should think very carefully before you do so.
Final Walkthrough Problems
Most buyers want to take a final tour of the house about a week before closing to make sure it's in the same condition as when they decided to buy it. This is usually only a formality.
It will be an issue if the buyers arrive for the walkthrough to find the refrigerator missing and the window shutters removed without being alerted beforehand. Similarly, if a seller promised to make repairs before the buyers moved in and they haven't been completed, closing may be delayed.
Solution: First, spell out everything in the purchase agreement, from maintenance to arrivals and departures. If you're a buyer, make sure your agent is in frequent contact with the seller's agent to verify the contract is respected. Honor the purchase agreement if you're a seller!
Closing Paperwork Errors
It may seem insignificant, but misspelled names, incorrect addresses, and unexpected fees can cause delays in closing by requiring you to print and review a new set of documents. It's completely avoidable, but it still happens.
Request a copy of all documents prior to signing day. Before closing day, you have the right to study any loan documents so do so, to avoid annoying lt minute delays.
A Change of Heart on Someone's Part
The closing process is an emotional roller coaster, and sellers may feel as if they've made a blunder. A buyer's financial status may change, or they may become hesitant to relocate. Because you have no influence over another person's emotions, you may have to manage the next steps as best you can.
Solutions: Once you've accepted a buyer's offer, they'll give you an earnest money deposit to prove that they're serious about purchasing your house. If the buyer decides to back out of the deal outside of the contract's contingencies, the seller keeps the earnest money. Of course, you'd prefer to pay the full transaction price, so seeking a greater earnest money deposit will help you avoid buyer's regret.
Before you put your house on the market, be sure you're completely ready to move. You must be emotionally prepared and have sufficient equity to profit from the sale. Research the local real estate market and consult with a real estate professional to determine the ideal time to sell in your area. All you can do now is prepare, because once you sign a purchase agreement, you may not be able to back out legally at closing.
It's simple for buyers: don't put money down that you can't afford to lose and try to be as sure as possible this is the home you really want before you make an offer.
Looking to sell your Waterloo Region home? Let Team Pinto use their huge local real estate experience and expertise to help you. Contact the award-winning Team Pinto here, or book a free Zoom consultation to discuss your unique Waterloo Region real estate needs here