submitted by the Prescott Area Association of REALTORS®
A signed real estate purchase agreement is not a guarantee of a home sale. A recent REALTORS® Confidence Index Survey showed that transactions today are experiencing about a 5% fallout rate.
Whether a buyer or seller, prepare yourself for the most common potential pitfalls.
Pitfall: Financing falls through. Buyers can be pre-approved before making an offer but then get denied the loan. Factors include: a ding on their credit, major expenses like a new car purchase, reduction in salary that changes their debt-to-income ratio or changes in lender guidelines or terms that make the loan no longer affordable.
Solution: If financing becomes an issue, sellers might consider offering an extension to enable the buyers to obtain alternative financing or find a cosigner/guarantor for the loan.
Pitfall: Surprise flaws. There may be issues like foundation problems or code violations that are nonnegotiable deal-breakers for buyers.
Solution: If you’re a seller, consider having a presale inspection and making repairs before you put your home on the market and disclose any material property condition issues (it’s required by law in many states). Buyers should work with their agent to determine whether items in the inspection report are a minor issue they can live with, a negotiation point that might lead to a seller repair or credit, or a deal breaker.
Pitfall: The appraisal doesn’t match the sales price. Sometimes the appraisal comes back lower than the purchase agreement amount. The lender will only provide a mortgage based on the appraised value.
Solution: Sellers should work with their agent to price the property properly. If the appraisal comes in lower than the contract price, the sellers may choose to lower the price, or the buyers may choose to make up the difference in cash.
Pitfall: The title is clouded. Unresolved liens or encumbrances on the property or legal disputes regarding ownership will need to be resolved.
Solution: Sellers should clear the title before listing the property.
Pitfall: Buyer’s home doesn’t sell. This could be an issue if the sellers have accepted a home-sale contingency in the contract.
Solution: Sellers should talk with their agent upfront about how flexible they can be on the closing date. Buyers may want to look into bridge financing to fund the closing before their old home sells.
Copyright NATIONAL ASSOCIATION OF REALTORS®. Reprinted with permission.
