When a seller wants to sell a home and finds a buyer who wants to buy it, you’d think they’d have a deal. What could go wrong? In today’s real estate market, plenty of things can go wrong. With the current tough financial climate, there are both longstanding pitfalls and a lot of new ones. The best-case scenario is that they can cost you time or money. Or both. At worst, the home you want could slip from your grasp. Here are some things that can prevent you from purchasing a new home:
- The appraisal kills the deal: even after you and the seller have agreed on a price, the appraiser can affect the deal. Appraisers arrive at a home’s value by comparing recent sales of nearby homes. But falling prices, foreclosures and short sales in the neighbourhood make these comparisons tough. Your sale can suffer if the appraiser doesn’t know the neighbourhood.
- Your lender demands home repairs: in today’s housing market, lenders may hold up a sale if the appraiser points out even minor repairs that need to be done. There’s nothing new in lenders insisting that homes be financially stable. In the past, a lender might let the buyer and seller agree to complete the sale and fix any minor issues later, paying for them out of the seller’s proceeds held in escrow. Today’s buyers and sellers are rarely given that option. To anticipate any issues an appraiser might raise, scrutinize the home inspector’s report for any potential problems with the property. Also, be certain all conditions listed in your purchase and sale agreement are met.
- The home has baggage: there is a chance that the home you want to purchase comes with issues. Any surprises usually creep up when a title search is done to clear the way for your purchase. For example, there’s a chance, given all the financial issues in today’s society, that someone besides your seller has a claim on the house. Occasionally, buyers are shocked to learn that the boundaries of the property they are buying aren’t correct. No one’s the wiser until your title search uncovers the error. But you can’t buy the house until the issues are corrected. Issues are able to set back the purchase of the home or end it all together.
- Tougher financial requirements: financing is a deal-stopper for many buyers. Lenders aren’t as accommodating these days. They’re rejecting a quarter of all mortgage applications. Lenders are up against home prices that are unstable in most markets. For example, no lending agent wants to give you $350,000 for a home that is destined to drop $50,000 in value within a year. Get your ducks in a row before shopping for a new home. Start looking a year ahead if possible.
- Preapproved? We changed our minds: experts advise you to apply—and comparison shop. Some lenders may preapprove you and later back out. The reality about preapprovals is that the term doesn’t mean much. There’s no standard industry definition, so the strength of your preapproval depends on the competence and experience of your loan officer. Even if you’ve submitted your loan application for preapproval, until you’ve identified a specific home your application won’t get serious consideration that is necessary for final approval. Even if the bank thinks you’re good for the loan, the property you like might have boundary issues, legal problems, a property dispute with neighbours or any other issues. Ask your lender how firm your preapproval is and what else could be required. Your lender should say you’ve been preapproved under certain conditions and should name them.
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