Beware The Hidden Pitfalls That Could

Easily Derail The Sale Of Your Home

Before You Reach The Closing Table

It is a joy to see a seller's reaction when they first receive an acceptable offer on their home. You can almost hear the gears turning as they mentally plan their next move in a matter of nanoseconds and get excited about the prospect of moving into a new home. Too often, however, I have seen that excitement wane into despair when a problem pops up after the contract is signed and the sale falls apart.

Once a seller has accepted an offer from a home buyer, a contract of sale exists and both the seller and the buyer have certain obligations to move forward as specified by the terms of the purchase contract. There are, however, certain conditions that allow a contract to be broken without penalty to the defaulting party. Until these conditions are met, any agreement made is tenuous until after the closing.

So what are these conditions that can cause exuberance to be displaced by depression? Out here in the trenches, we are constantly reminded of the little real estate devils that lurk to spring on the unsuspecting home buyer or seller. Many times it cannot be avoided and you just have to brace yourself for the impact and move on. However, by knowing the things that can blind side you, you can take steps to minimize the possibility that they will occur and plan for the worst.

The most common issue and usually the first to crop up is the home inspection. The buyer is allowed a home inspection before the sale is consummated to determine the integrity of the home. If major defects are found or there are a number of problems that were not evident when the purchase offer was submitted, the buyers can get out of the contract and get their good faith deposit back if the seller is not willing to agree to the repairs requested by the buyers. If buyer and seller cannot agree on the repairs to be made, the contract can be cancelled by either one. Normally they agree, but not always.

If there is a home owner's association, known as an HOA, the buyer is entitled to receive a current copy of the association's covenants, restrictions, and conditions covering what the homeowners in that association can and cannot do with their property. Usually things like fence height and appearance. Once the buyers receive the HOA packet, they have a specified time, usually three days to six days depending upon the delivery method, to accept the terms of the association or they can reject those terms. If the buyers elect to reject the terms of the HOA packet, they can get out of the contract without penalty. In fact, the buyers do not have to give a reason for rejecting the association covenants. Merely stating that they cannot abide by the conditions, the buyers can use the HOA to walk away from the sale if they so choose. Yes, I?ve had this happen to me more than once.

Once the home inspection is satisfied and the HOA terms have been accepted, the buyers' mortgage lender will hire an appraiser (which the buyer pays for) to determine the purchased home's value. If the appraised value of the house comes in below what the buyer has agreed to pay for it, the lender will not loan the buyer the purchase price amount. A lender will only offer a mortgage amount equal to the appraised price of a home.

For instance, if a house was sold for $100K, but the appraisal came in at $95K, the lender would only give a mortgage for $95K. The buyer and seller then have three choices: the seller can drop his price to $95K or the buyer can put in the $5K to pay the full sales price or both parties can walk away.

Another common deal breaker is financing. Just because a buyer has a pre-approval lender for a certain amount from a reputable mortgage lender does not mean that he will actually get the money. Mortgage companies issue pre-approval letters usually based upon a credit score only. However, when it comes time to actually give the money to the buyers, the lender's underwriter digs deeply into the buyers' credit history and employment data. Too often, problems are discovered at this stage which can cause a mortgage application to be denied at the last minute. If a buyer cannot come up with the necessary financing to buy your home, he can default without penalty and you, the seller, are stuck with any ramifications.

Out here in the field I had a recent experience with my seller client that caused a lot of problems for a lot of people in that regard. Two weeks before closing, I got word that the buyers' financing had fallen through, even though I had a pre-approval mortgage letter from a well-known and reputable bank. You can't imagine all the people that had worked to gather all that was necessary for the closing to have it all fall apart in the eleventh hour. Worst was that my dear seller client had made plans because of the expected sale. It was a sad tale and one that we eventually turned around. This business can be gut-wrenching.

These are the major areas in which a contract can be voided without penalty to either party. There are many other situations that can occur in a real estate transaction that can affect the outcome of any sale or agreement. It is always prudent to seek the advice and services of legal real estate professionals whenever a contract may be threatened.

Keeping these things in mind when planning your home sale or purchase can make the difference between a smooth real estate transaction and a rough one. There are some good websites out there that have information to help you. One of my favorites is www.VirginiaRealEstateNetwork.com Just click on this link and check it out. Please keep in mind that my statements above are based on my personal experiences in and around the neighborhoods of central Virginia. Some statements may not reflect fully the regulations and laws of other states nor apply in all areas, so please see what applies in your state (my disclaimer to keep me out of Realtor Jail).

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