10 Important Keys to Selling Your Home
If you would like to have your home offer accepted and have your home purchase go through without issues, there are a few key factors you need to take into consideration. Just because your home offer is accepted does it mean that you're going to get the house. There are still a few essential things that need to be taken into consideration.
This is very much like an athlete who is training for a competition. You can prepare yourself for the final steps in purchasing the home of your dreams. Every state has different escrow procedures and different rules that must be followed. Still, in this article, I'm going to give you 10 of the most common issues that you will most likely encounter throughout the closing and escrow process. This way, you can prepare yourself in advance to prevent as many of these problems as possible.
Different Kinds of Problems that come up Throughout the Escrow
These include low appraisals, pest damage, claims to title, and defects found by the home inspector during the home inspection. At times the financing can fall through, and there are other points for the buyer or seller may simply just get cold feet. Other issues that may arise are high-risk areas or uninsurability. At times there may be issues with good faith estimates and even other errors that may have been made during the closing.
Damage due to Termite Inspection
There will be a pest inspection done on the home by the lender. This is normally done at a cost to you as the seller; however, it is normally less than $100. What they're looking for is any damage caused by insects such as termites or carpenter ants. This way, the lender's interest is protected in the property. If after the homeowner moves in and they find termite problems or other insect problems, they are going to abandon the property most likely. This ends up leaving the lender in a lurch; whether the lender requires a termite inspection or not will still be in your best interest to get one.
Here is an article about the important keys to a home inspection:https://www.zillow.com/home-buying-guide/home-inspection-checklist/
Once this inspection is done, if it uncovers an infestation of any kind, the problem areas are going to need to be remedied before the escrow can close. If the problem is extremely severe, or perhaps the cellar simply will not pay if you have the areas treated, you can always walk away from the purchase and the agreement with proper contingencies.
The Appraisal Comes in Too Low
An authorized third party will do what is called an appraisal. These appraisals are usually done for tax purposes; they're also done as part of home financing or when you sell a home. Home appraisers use many different methods to properly determine a property's value. This includes the value of other homes in the area.
During the escrow process, the bank will normally have the home appraised. The home appraisal will also be at your expense. Again this is done to help protect the lender as they want to make sure that they are not financing too much money on a home that's not worth that much. This way, if there is a foreclosure and you lose the house, they know that they will be able to cover their losses and ideally even come out ahead. When the appraisal is done, if it comes in too low, the seller of the home most likely will have to lower the cost of the house, or as the buyer, you would have to pay out-of-pocket to cover the difference. Another option, in this case, is to get a different appraiser and attempt to get a second opinion.
The Title has Clouds
To protect the buyer and the lender against any future claims to the property, it is vital to carry what's called title insurance. If the property already has a lien or a claim against it this must be taken care of and completely resolved before the sale of the home can proceed. A home cannot be sold unless it has what is called a clear title, which is a title that does not have a lien or claim against it. What title insurance does is protects against ownership by a third party, a forgery, or any fraud. It will also cover any judgments or liens that may be on the home and the property.
Normally you'll have to have done what is called a title search and issue this title insurance during the escrow process, and it must be done by the title company. What the title search does is ensures that no one, including the IRS, or the state, or anyone else, has put a lien or claim on the property.
Defects are Found During the Home Inspection
Normally any kind of offer to purchase a home will have what is called a home inspection contingency put into the offer. The home inspection is done by a third party who is a licensed home inspector. This home inspector is looking for any defects in the home that they can find. The important key here is to have this contingency put into your contract as the buyer, if you do not and you decide not to purchase the home based on the home inspection you may lose your earnest money. The earnest money is what you deposited at the beginning to show that you had good faith and were interested in purchasing the home.
Another issue if problems are found during a home inspection is that you may need to negotiate directly with the seller to have these issues repaired. This will take time and will cost money. In most cases, however, the seller is the one who's going to have to put out the money to make these repairs. The other option you have is to make the repairs yourself and see if we have the seller credit you the money at closing that does repairs cost.
The Problem of Cold Feet
Within the contract that you have for home purchase, it should spell out any justifiable reasons why either the buyer or the seller want to back out of the sale and how they can do so without penalty. However, as the seller you wave your contingencies and then decide not to make the purchase, you will most likely lose your earnest money.
What the earnest money is there for is to help compensate the person who is selling the home for the time that the home was not on the market. If you decide to back out of the sale, that's time that they cannot get back in time if they could have been selling the home to someone else. Ultimately this delay increases the amount of time that it takes the seller of the home to get the home sold. It’s basically money to make sure that they're not wasting their time.
Here is how to get pre-approved for a mortgage: https://www.zillow.com/mortgage-learning/pre-approval/
The Financing You have Gotten Falls Through
You should always have a pre-approval before you make an attempt to purchase a home. A pre-approval is a written loan commitment-friendly mortgage company bank or lender. It states that they will provide you with a certain amount towards the purchase of a new home. In most cases, sellers will not accept offers from a buyer who is not already pre-approved. One thing to keep in mind is that a pre-qualification is not the same as a pre-approval.
However, at times throughout the closing of the home issues may arise that affect the financing. You may have had a job situation change, your credit score may have dropped, or interest rates could have increased dramatically. Should your lender decide not to follow through on the pre-approval they gave you, they do owe you an explanation. Things like religion, national origin, race, and other similar situations should never delay your homeownership.
The Property You're Looking at is in a High-Risk Area
If you are in a high-risk area, there may be a possibility the lender will require you to purchase Hazard insurance, which goes above and beyond the normal homeowner’s insurance that you'll have to carry. As you can imagine, hazard insurance is very costly. Plus, you will be required to pay this monthly during the time of the mortgage.
Uninsurable Properties
If there was a major Insurance claim made on the property, say something like water damage or mold it will normally show up in the record you receive from the insurance company. Because of that, you may not be able to get insurance on the home; it may be too much of a risk for any insurance company. The only option you will have available at this point is if you are an all-cash buyer because lenders simply will not provide a mortgage for homes that are uninsured.
A Difference Between the Estimate in Good Faith and the HUD Document
In most cases, you'll receive a good faith estimate from the lender. This estimate will detail the costs associated with the purchase including closing costs, obtaining financing, etc. You will receive this information twice, the first time is when you get your loan pre-approved, and the second time is when you put an offer on a particular property.
Essentially the good faith estimate is a ballpark rough draft of the information from the HUD form that you will receive at least 24 hours before closing. The bottom line is this good faith estimate should be a very close summation of what you end up paying. Ideally, in most cases, it should be within 10%.
However, if you have an unscrupulous lender that has not been realistic about these estimates, you could have a real problem on your hands. If that's the case your best bet is the contact the seller and make a request for an extension on the closing date so that you may obtain a better source of financing.
Not Closing on Time Because of Errors
The truth is there are many different people involved in this closing process. If anyone makes a mistake, it can cause the escrow to be delayed. If this happens, it is possible that you may have to pay the seller a penalty for every day that the closing is late. Whether this happens or not will depend on whose fault it is and any specifics in your purchase contract.
The entire deal could fall through if the seller refuses to extend the closing date. Depending on the specifics, the seller could agree to extend the closing date with no penalties to you, the buyer. The seller has a vested interest in making this happen and not having to start all over again themselves.
The bottom line is buying a home is a transferring of ownership from the seller to the buyer. It normally happens in a relatively short amount of time and lots of things have to occur during this period. Because of the many major issues involved, things can at times fall through. Take your time and prepare yourself as best you can by using the information in this article, and hopefully, you won't have any issues.