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3 Common Ways A Home Purchase Will Fall Through

Fall Through...It Happens

Fall Through…It Happens

Orange County, CA – There was a time a decade or so ago when buying a house was an exciting affair, not unlike watching a good kid’s movie like The Avengers or Bolt.  Today, however, buying a house is much more like watching Finding Nemo. By the time your average buyer is halfway through with their transaction, they’re twitchy and nervous, wondering what the next obstacle to jump out from the shadows will be. There’s no doubt that it can be an unsettling process. Here are three of the most common ways that a real estate deal can fall through, and what you can do to avoid them:

 

The Home Appraises Lower Than the Selling Value

Many buyers are overjoyed when a house appraises significantly below the seller’s list value. They think they can use the appraisal to get the price reduced. What they don’t see is that many of today’s sellers are already taking a loss if they sell at the current price. When the appraisal comes in below the selling price, you may end up in a situation where the seller can’t afford to go any lower, but the buyer isn’t willing to overpay for the home…and the deal dies on the table.

 

Similarly, in today’s hot market, sellers won’t cut their price regardless of value. With housing inventory so low and multiple offers being the norm, other buyers are willing to waive the appraisal and pay the additional money in cash.

 

The way to avoid these situations is straightforward. Don’t rely on the appraiser to give you a price you can work from. Appraisers are providing an opinion of value. Two appraisers will have two different opinions. So you can get the information you want from the market itself by asking about the local comparable home sales.  If your sale price is on par with the others in it’s area, you’re unlikely to get a lower price no matter what the appraiser says.

 

Poor Property Conditions

Many buyers don’t realize that lenders simply won’t give them money to buy a home if it’s in a profound state of disrepair. The market has plenty of “as-is” bank-owned, short-sale, or ‘zombie’ homes. While it can seem like a good idea to pay less for a home and then more to fix it up, you have to clear that plan with your lender before you assume the ability to make a purchase. These are investor’s dream properties. So in many cases you’ll be up against a cash buyer. And if you can’t compete with that you’ll need to look at renovation loans such as Homestyle Renovation.

 

Loan Approval Takes a Long, Long Time

Getting pre-qualified for a loan is wonderful. But many buyers don’t realize that it’s just the beginning of the process. The real work begins once you have an accepted contract. For example, you may have a 17 day contingency period for inspections and loan approval. What if the appraisal comes in low? Then the underwriter wants you to verify that $500 deposit you made, then send a full copy of the business LLC, and then a letter from your boss that says you can work from home because you’re moving an 35 extra minutes away. You can see where this is going. One door opens another in this process and sometimes we open Pandora’s box.

 

You don’t want to remove your loan contingency because your earnest money deposit is vulnerable. Most buyers would rather let the transaction die early than risk not getting several thousand in earnest money back should the purchase fall through later.

 

The best way to avoid this scenario is to work with a mortgage professional and a real estate agent that are seasoned. Your agent can stay abreast of the developments on the buyer’s side and work with the seller to obtain any extensions or help you legitimately need.

Scott Storace

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