Closing a real estate deal is no easy feat. Some deals collapse at the last minute, even when they seemed so promising initially. As the buyer or seller, it can be frustrating. Understanding why this happens can help you avoid the hurdles that usually come up when closing a sale.
Below are some of the common reasons why home purchases and sales fail before closing.
Appraisal of the property for taxation or financing purposes can set a lower or higher value than the proposed market value. This can derail closing the deal. For instance, a buyer will be hesitant to pay more than the appraisal value, while the seller may be unwilling to lower their price. An appraisal gap can lead to a stand-off.
Clouds on the title
Every buyer wants a clear title that will not bring up issues later on. If a title search reveals clouds on the title, such as outstanding taxes or pending liens on the property, closing a sale may not be possible until the clouds are cleared.
Undisclosed property defects
Before a sale is closed, a buyer must be aware of all property defects. It is part of assigning value to a property. If some of the property defects remained undisclosed, it could change the property’s value, and the deal could go off the rails.
Lack of financing
A buyer may make an offer without pre-approval. However, the deal may not materialize should the financing plans fall through. The lender may block the loan for several reasons, such as mistakes in the paperwork or incorrect information.
Better safe than sorry in real estate transactions
Selling or buying a home is a significant yet complex financial transaction. Many things have to happen in a short period, and any mishaps can be costly. Understanding how the entire process works and how you can safeguard your interests when negotiating a real estate deal will help you make the most out of it.