Purchasing a home can be both exciting and nerve-racking. Prospective homeowners face tremendous amounts of waiting as the home buying process ensues. Here is a list of everything that can go wrong during the closing of your new dream home.
The majority, roughly 66 percent, of buyers get financial assistance when purchasing a home. Mortgage lenders often require appraisals of the property to determine their worth even if the buyer and seller have already agreed on a price. In the case of a low appraisal, the borrower can make up the difference, find financing elsewhere, pay for an additional appraisal or back out of the transaction completely.
Unfortunately, pre-approval doesn’t always ensure financing. Last minute problems may arise if the borrower loses a job, gets divorced, makes major financial purchases or experiences any other change in circumstances. Delays can occur as new financing is obtained.
Before closing, a title search will be conducted on the property. If there is any unpaid debt that lists the house as collateral, the sale can’t move forward until all liens are cleared up.
An infestation is reason enough for a lender to back out of the deal, even if both parties want to continue with the transaction. Before closing, the buyer needs to have the home inspected for termites and other pests. In the case of a manageable infestation, treatment should be complete before closing.
An inspection will be conducted to assess the integrity of the house. The inspectors will look for insect infestations, damaged roofs, leaky pipes and more that can lead to delays. If repairs are needed, both parties decide whether the seller will make repairs before closing or compensate the buyer for making the repairs at a later date.
Often, many buyers ask to do a walk-through of the home after the sellers have moved out. The closing may be delated as both parties decide how to handle any issues that may have occurred since the last showing. Issues include furniture or rugs concealing damage, movers putting holes in the wall and more. The initial purchase contract typically outlines how delays should be handled.
In October 2015, three standard forms were replaced with the Loan Estimate form. Mortgage lenders must send one of these with the terms of the actual loan off at least three business days prior to closing for the borrowers to review. If the terms needed to be changed during this time, the three-day window resets and thus extends closing.
A buyer is expected to show up at closing with certain documents including copies of the homeowner’s insurance policy, proof of insurance payment, photo ID and certified funds for the closing costs. Failure to bring any of the above mentioned items will post pone the closing.
Typically title companies and attorneys prepare the forms and documents for signing after all inspections, appraisals and other paperwork has been submitted. But even professionals can make mistakes and incorrect or incomplete paperwork can be a headache. Although typos and missing documents don’t usually squash a deal, errors can delay the closing process.
Although rare, sometimes a buy or seller just simply changes their mind. No longer wishing to continue with the transaction midstream can have its consequences. For instance, the buyer would forfeit their earnest money if they back out. If the seller backs out, they could be required to pay costs incurred by the buyer for inspections, appraisals and lender fees.