Real estate negotiations are long and cumbersome, involving banks, insurance companies, title processors and government regulators.
It pays to be aware of all the possible risks, especially those at the very end of the process.
1. Bank disbursement falls through
Your home’s appraisal should already be underway well before closing. If the appraisal comes back low, the bank may disburse a loan only up to the amount of the appraisal, not for the projected closing price. This will require renewed negotiation or the deal may fall through. There even may be mortgage fraud scams, as the Consumer Finance Protection Bureau reported in 2019.
2. Problems with the title
You may get a surprise when the title company reveals its report before issuing title insurance. Title issues that delay closing include federal or state liens, property claims by a third party or contractor liens.
3. Inspection reveals major problems
Inspection and appraisal usually go hand-in-hand, but while an appraisal is likelier based on market conditions, the inspection uses hard data and the construction features of the home. A pest infestation, foundation cracks and faulty electrical wiring will make the process longer before closing.
4. Insurance hold-ups
Older homes sometimes have had major claims made on the property. Banks don’t want to fund a mortgage on a home that may end up requiring major repairs or remodels. Trying to buy a home that no one will insure is a fast way to stall the closing process.
Look out for all of these challenges and keep yourself informed each step of the way.