Transferring ownership of a home can be a nerve-wracking experience for everyone involved. The real estate closing process involves numerous crucial steps, and any misstep could lead to significant delay and occasionally, monetary consequences. Even under the best of circumstances, the journey can be overwhelmingly stressful for buyers, who find themselves navigating complex and often unfamiliar terrain while grappling with weighty decisions regarding what is likely the largest purchase of their lives. Let's delve into some of the reasons the purchase might collapse…
Low Appraisal
Appraisals, which determine the value of a property, are typically carried out by licensed appraisers in order to establish the value of the new home for financing purposes. An appraisal is generally required by the lender to establish a loan to value ratio (the percentage of the total property appraisal of your requested loan.) and insure that ratio is within the lender’s guidelines. An appraiser uses several methods to establish a home’s value, including assessing current market values of comparable homes. If the appraisal value falls short of the agreed-upon purchase price, the seller may need to reduce the selling price, or the buyer might have to cover the shortfall with cash. If this occurs, both the buyer and the seller should carefully review the appraisal to make sure that the appraiser included all the home’s assets in the appraisal and ask the appraiser to correct and omissions or errors found, which may rectify the problem.
Adverse Home Inspection
Most purchase offers include a contingency for a home inspection. Should the inspection uncover significant issues, the purchaser can withdraw from the deal without penalties, or the purchaser and the seller can agree to method or handle the cost of rectifying the problem(s).
Financing Hiccups
In today’s active marked, wise buyers typically seek preapproval before making offers on homes, which involves obtaining a written conditional loan commitment from a bank. Astute sellers tend to favor offers from preapproved buyers. However, numerous factors can derail loan approvals, such as inaccurate application information, sudden interest rate spikes, changes in employment status, or declines in credit scores. It's crucial to consult your lender to avoid such pitfalls. Moreover, if financing falls through, potential lenders should provide a transparent explanation. Discrimination based on race, religion, sexual orientation, or national origin being unacceptable barriers to homeownership.
Insurance Challenges
If a previous homeowner filed significant insurance claims, such as for water damage or mold, those claims are recorded in insurance records. Consequently, insurers might refuse coverage due to perceived risks associated with the property. Flood insurance may also be required, at considerable expense. If there are insurance issues, but the buyer still wishes to purchase the property, the easiest way is to pay cash because lenders typically mandate homeowner's insurance to hold a mortgage. However, cash buyers should be wary of acquiring uninsurable properties, which will leave the new homeowner with no insurance against even the most routine of claims..
Documentation Errors
A real estate closing involves multiple parties, creating the possibility of errors that may cause delays. Depending on the purchase contract and the party responsible for the delay, penalties may be applied for each day of delay. Alternatively, the seller might refuse to extend the closing date, jeopardizing the deal. Ideally, the seller will agree to extend the closing date without penalties, understanding that a failed deal means restarting the sale process and the search for a new buyer.
Title Complications
On occasion, a property will have unresolved prior mortgages, municipal liens, or other claims on record at the time of sale. These are discovered by a title search, conducted by a title insurance agency of your choice or your attorney. Any outstanding liens or claims must be addressed before the transaction can proceed smoothly. A clear title is essential for a successful real estate transaction, covering ownership disputes, forgery, fraud, and any liens or judgments against the property. Title insurance shields both the buyer and the lender from future claims against the property. Lenders usually require title insurance to cover the value of the mortgage loan. Lender’s title insurance coverage decreases in value as the mortgage amount decreases. Adding owner’s title coverage to cover the full purchase price adds only a small amount to the overall cost and should also be purchased at the time of closing. Owner’s title coverage does not decrease over time.
Conestoga Title Insurance Can Help
For over 50 years, Conestoga Title Insurance Co. has firmly established itself as a highly esteemed figure in title insurance. Recognized for its steadfast commitment to providing reliable title insurance services to the real estate, legal, and financial industries, Conestoga Title stands as a reliable and respected entity. The cornerstone of its achievements lies in its dedication to building robust relationships through exceptional service, extensive expertise, and a strong sense of financial security. Explore the frequently asked questions on our information page or contact us at 800-732-3555 for further details about how to obtain proper title insurance.
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