It’s a common occurrence for a house sale to fall through, sometimes even right before the closing. As the seller, this can be detrimental, because it means you have to put the house on the market again. As the buyer, it can be even worse because now you are without a place to live.
So how do you prevent this from happening? Understanding the top reasons house sales fall through can help you protect yourself.
Unable to Sell Your Home
If you have a home to sell at the same time that you buy your new home, you may find yourself in a bind. In a perfect world, everything would work out at the same time. You’d have the perfect buyer for your home and it would close at the same time as the home that you are buying.
Unfortunately, that doesn’t always happen. The sale on your current home can fall through just as much as your own purchase can fall apart. In order to protect your earnest money in this situation, you should have a home sale contingency on your purchase contract. This way if your home doesn’t sell by a certain date, you can back out of the contract with your earnest money in hand.
The Inspector Finds Things Wrong With the Home
It’s not a requirement to get a mortgage, but we highly suggest that you get an inspection on your home. The inspector will go over the phone with much more detail than the appraiser. The appraiser’s job is to figure out the fair market value of the home. He will look at the basic operation of the home but he won’t look at all of the nooks and crannies that an inspector would investigate.
If the inspector finds major issues with the home, such as cracks in the foundation or mold growth in the basement, you may want to change your mind about your purchase. In fact, many buyers do change their mind. If they don’t want to deal with the work and/or the expense that the issues may cause, they may walk away from the purchase of the home. You have the same right too.
Financing Falls Through
Even if you get preapproved for a mortgage before you start shopping for a home, there’s still a chance your deal could fall through. Just because a lender says you qualify for a mortgage, it doesn’t mean that they have completely underwritten your loan.
Lenders base a preapproval on your basic income, asset, and credit information. If something pops up through the underwriting process or if the home doesn’t pass the appraisal, your financing could fall through. In other words, the lender could change their mind.
Lenders have a list of conditions that your loan is contingent on and if you can’t satisfy them, you won’t get the financing. Many of the factors you have control over, but anything that has to do with the home itself, you obviously don’t have a say in, which could mean your loan falls through due to no wrongdoing of your own.
The Appraised Value Isn’t High Enough
Just as we stated above, the appraisal is one of the largest factors of a loan approval. If the appraiser decides that the home’s market value is less than you offered to pay, you won’t be able to get financing. In the rare situation you may be able to pay the difference between the value and the purchase price, but many lenders don’t even allow that. If you paid the difference, you’d enter homeownership owing more than the home is worth, or you would have negative equity. That’s not the best way to start homeownership and many lenders won’t allow it.
Issues Right Before the Closing
Finally, you may have issues right before the closing. Lenders pull your credit one more time before you close on your home. They also verify your employment one last time. If you’ve damaged your credit in any way or you lost your job before you closed on your loan, the lender will know about it. Either of these situations could leave you without a loan.
If you know something major changed in your financial life before the closing, it’s best to be honest with the lender. Let them know what went on and then they can tell you how to proceed. Sometimes there are ways to fix certain issues, but you won’t know unless you are honest with your lender.
Buying a home does put you at risk for losing it at the last minute. It’s a common occurrence, but there are ways that you can prevent it in some cases. As long as you work with a reputable real estate agent and lender, you should be in good hands to get from the purchase contract to the closing without issue.