After weeks, or potentially months, of searching for a home, getting Your 650 Score, and negotiating with the seller, you’ve finally had your offer approved/accepted. While you may think the difficult part is over, you still have one more hurdle to navigate – the closing process. Throughout the following 30 days, if not longer, between the offer acceptance and the delivery of the home keys, there are several issues you must face. While the exact scenario you encounter may vary, the following hurdles are common throughout the American closing process. By preparing yourself for these hurdles and others like this you may face along the way, you’re better prepared to face this final challenge in securing your new home.
Hurdle #1 | Low Final Appraisal
While you’ve likely had the home appraised, before the closing can finalize, many banking institutions require a second appraisal. Should this appraised amount be too low, either the seller will have to lower the sales price or you’ll be required by law to pay for the difference in cash. This is essential for the mortgage lender as the appraised value must be high enough to recoup their losses should you enter foreclosure.
Hurdle #2 | Excessive Termite Damage
Generally, before the closing on a property can be completed, the home must be inspected for termites. In fact, this is generally required by your home lender to ensure the structure is sound before they place the final approval on your home loan. Even if your lender does not require a termite inspection, it’s best to have one done to ensure you don’t move into a home that’s in need of major repairs or complete reconstruction. If the problems are severe, and seller refuses to correct the problem, then you may be able to walk away from the agreement. Remember: make sure the purchase agreement features a clause stating if there is unforeseen damages the seller is unwilling to cover, you (the buyer) has the option to walk away without paying any fees.
Hurdle #3 | Unclean Property Title
Prior to closing on the home, you must hire a title company to investigate the history of the property title. Should the house title feature some type of legal claim, such as the IRS or the state, the title must be cleaned before the house can be legally transferred into your name. In some cases, this can prove detrimental to the selling/buying process. Make sure the purchase agreement features a clause stating you may walk away from the purchase should the title not be clean.
Hurdle #4 | The Home Doesn’t Qualify for Insurance
Should the previous homeowner filed a major claim against the home, such as serious mold problems or water damage, an insurance company may refuse to issue an insurance policy for the property. If this is the case, you’re legally barred from purchasing the home unless you pay for it in cash. This is because all mortgage lenders require some element of insurance over the property in order for the loan to be activated.