Overlooked details, unexpected issues, financing conundrums — they’re what real estate nightmares are made of. There are many moving parts throughout the homebuying process, and they all need to be completed successfully before your client has their keys in hand.
The good news is that by anticipating challenges, you can take preventive measures to ensure that your deal goes off without a hitch, even amidst unforeseen obstacles. Don’t panic: As long as you have your wits about you as you move through each stage, stay organized and communicate clearly with all involved, you can experience a successful culmination of your transaction.
Here are five closing pitfalls that might get the better of you if you don’t have your eyes wide open going into the transaction.
For those who don’t have massive amounts of cash, a mortgage is necessary for buying a home. So, it’s crucial to be thorough when it comes to qualifying for a mortgage. What could go wrong? A buyer could be denied or have a much smaller prequalification than initially expected.
If all the information they provided to the lender isn’t perfect, that can also cause hiccups. And here’s an unfortunate predicament: racking up too much credit card debt in their excitement of a prospective new home, resulting in an unsavory final credit check.
Additionally, if a buyer’s employment changes and their debt-to-income ratio isn’t holding up, that can also be a big bump along the road to homeownership.
We emphasize with our clients that the preapproval process ahead of the home search process is a key step to avoiding any mortgage issues. Make sure they stay in regular contact with the lender and swiftly provide documents. For sellers, we recommend only considering buyers that present a preapproval letter.
Unexpected appraisal amount
If a home is evaluated at a lower or higher amount than expected, you’ll have to troubleshoot as the agent. The most important thing to embrace when going through this process? Compromise.
If a home appraises low, the seller either needs to lower the asking price so the buyer can obtain the loan, or the buyer will need to make up the difference in cash. Setting realistic expectations with your clients is important; things may not turn out exactly the way they envisioned, but hammer home that the end result of homeownership is worth it
Red flags during the inspection
Every home has its quirks and opportunities for improvement, but if serious problems arise, you may find yourself in a bit of a pickle. Many buyers will include an inspection clause that allows them to hire additional professionals to come and inspect the property.
If problems surface, the buyer and seller will need to come to an agreement on how the items will be resolved. If a solution isn’t reached, the buyer always has the option to walk away, so position your seller to do what it takes to complete the transaction — they can offer to have the repairs completed or offer concessions to offset costs.
Otherwise, they will need to find another buyer who is willing to buy as-is. Again, compromise is an essential skill and mindset that will get everyone through the sale in one piece.
Here’s where sellers may be holding their breath: the final walkthrough. At this point, all agreed-upon conditions should be met. If they aren’t met, the sale is at risk.
So, sellers need to take these agreements seriously and actively resolve any issues in a speedy and professional manner. On the other side, buyers need to be aware and thorough during the final walkthrough, checking their boxes off with meticulous care.
Cold feet are real and something buyers and sellers should both be cognizant of. In today’s bustling market, a buyer rarely gets the chills, but it does happen. If feelings of uncertainty arise on either the buying or selling side, the deal can quickly crumble.
Earnest money is required to show that a buyer is serious about the home and helps reduce over-eager buyers who aren’t ready to seal the deal. Sellers always have the option of requesting a larger sum for their earnest money deposit to add peace of mind.
It’s more complicated if a seller steps out of the deal before closing; buyers can even sue for damages, and listing agents can sue for loss of commission. So, if anyone is getting cold feet, it’s your time to shine!
The guidance of a real estate agent is a dealmaker here — quell those nerves, reassure and guide your clients through this emotionally taxing process. Communicate, communicate, communicate — talk them through their options, and make it a safe space for them to bring their concerns to you.
James Harris is a director at The Agency in Los Angeles. Connect with him on Instagram. David Parnes is a director at The Agency in Los Angeles. Connect with him on Instagram.