Selling a home can often be one of the most frustrating, and emotionally draining events in a person’s life. So when a buyer is about to withdraw from the sale it can be extremely disappointing, bringing a seller to tears. How can you avoid having a transaction fall out of escrow?
The answer is to know what to watch out for so you can steer clear of disaster. To help, let’s explore the top reasons real estate transactions fail and how to avoid them.
1. Failure To Obtain Loan Approval
The most common way a transaction falls out of escrow is the buyer fails to qualify for the home loan. For the buyer, this can be avoided by making the necessary steps ahead of time to make sure you’re going to qualify. For sellers make sure your real estate agent speaks with the loan officer and asks questions that will provide a better picture of how strong the buyer looks for obtaining a home loan.
2. Buyers Remorse
Ah.. Buyer’s remorse – the term given to the feeling a person often gets after making a large purchase. Although excited at the time of the purchase, once they’ve had some time to dwell, and then panic about what they’re getting themselves into (commitment, payments, responsibility, etc), they start to feel a deep regret and concern that they made the wrong decision.
Buyers that are suffering from buyers remorse will begin to pick the home apart, complain about the inspection reports and the appraisal, and they’ll start to look for reasons to withdraw from the sale. After all, a home is the most expensive item that most of us ever buy.
To avoid this from happening remind the buyers agent that they are receiving one heck of a deal, and why the home is such a good value. Emphasize the benefits and the features of the home. The buyers agent will then relay the information to their buyer. In San Diego sellers also ask for at least a 1% earnest money deposit to demonstrate a commitment to the purchase. Since $1,000 or more is on the line the buyers are much more reluctant to withdraw.
3. Low Appraisal
Appraisers have become much more conservative with their values since the real estate meltdown. So make sure you do all of your homework ahead of time before listing the property. Take a look at what other properties in the area are selling for. Pull up recent sold properties from the MLS, and prepare a little folder for the appraiser explaining why you feel the property is worth the listed amount. You need to provide the appraiser with comparable sales and they must be within close proximity of the property. Point out the new construction, remodeling, amenities, etc.
4. Poorly Written Contingencies
Almost every home sale is subject to conditions or contingencies. These are the points that a buyer or seller must resolve during escrow in order to successfully close the transaction. For instance, a common condition of sale is the acceptance of an inspection report or the review of a preliminary title report. The challenge with addressing conditions within escrow is that, if they have been poorly written or do not include a specific deadline for completion, it can quickly lead to disaster.
To avoid a problem, be sure that all parties in the transaction have a clear understanding about the meaning of the condition and a clear deadline as to when the condition will be removed or resolved.
5.Inspection Report Reveals Defect
Inspection reports can definitely put some fear into a buyer. If the report comes back clean, the buyer is happy, but if the inspection reveals something that wasn’t anticipated in the purchase contract, this may cause some issues especially if the seller and buyer can’t agree on a solution. To avoid this, get a pre-inspection on the home. So you’ll know exactly what condition the home is in and can appropriately list the issues that may be of concern. These must be presented during the initial negotiations to avoid any conflict down the road. Even if you don’t catch a problem ahead of time, be reasonable in negotiations after you find the problem. Avoid pointing your finger, it’s a small world and you never know when the person you are pointing your finger at is someone whose opinion or assistance you’d want tomorrow. You can’t force the other side to be reasonable, but if you control what you can control, chances are better that you’ll come to a mutual understanding and get the deal done.
If you gain anything from this article. It should be that if you want to avoid troubles with your escrow, you need to be prepared, level headed and objective. Many more escrows close than don’t. The reason is preparation and an ability to adapt to the circumstances.
If you are a first time home buyer, owner of many homes, or if you had a recent foreclosure or bankruptcy, you may apply for a VA loan. VA home loans are not based on credit score. In fact, if you are eligible, you can use your benefit to get as many VA loans as you want. The restriction is that you can not usually have more than one VA loan at a time.