Getting Your Home From Contract to Closing
Many people believe that the hard work is done once a property goes under contract. This is wrong! The hard work is actually just beginning. Many things can go wrong at this phase of the contract. Some of the pitfalls can just be minor disturbances and others can cause the deal to completely fall apart and have the property go back on the market. To prepare yourself fully it is important to understand the processes involved before continuing and make sure you are fully aware of any potential problems. If you’re working with a REALTOR® he or she can guide you through this process.
Loan approval. Buyer-financing problems are the No. 1 reason houses don't close. After what the market has gone through, lenders are leery. Most offer will come with letters from the buyer's direct lender, saying that the buyer had been preapproved for the loan. That's pretty standard.
Tip: As added insurance, however, ask for a pre-approval letter instead. The difference between approval and qualification is simple. A pre-approval with include the lending broker verifying what the buyers have told them (credit reports, income verification, etc). A pre-qualification will be based on what the buyers have said with no verification.
Appraisal. In today's market, getting a home to appraise for the purchase price is a big problem. Housing values are rising faster than appraisals, which rely on past sales. Banks base loans off either the purchase price or the appraised value — whichever is less. So if a buyer is taking out an 80 percent loan, the bank will loan 80 percent of the lower number. If the house appraisal is lower, the buyer either has to pay more, the seller has to lower his price or the deal is dead. Low appraisals kill about 40 percent of deals.
Tip: Have a good idea of what the house should appraise for. A seller should have a CMA which includes past sales. Appraisers will normally go no further back than 6 month and no further away than 1 mile in a suburban area. Keep this in mind when looking for what other homes have sold for.
Home inspection. Buyers should have an inspection done within a week of signing the contract so parties can address issues early. Deals rarely fall apart over a home's physical condition, but buyers can use these reports to get sellers to lower the price, make repairs or both.
Tip: Have the house in good repair before you list. Or, be proactive and have an inspection done before the house is listed. Present that report to buyers saying the home is for sale "as is." The buyer can get a second inspection, which won't likely be too different but having the inspection up front protects sellers from buyers who want to nitpick. Also remember there are certain repairs that will be lender required. This will have to be done in order for a bank to loan money. There are also some repairs that won’t be lender required. There is no mandate to fix these types.
Title clearance. A property's title lists who owns it and any liens against it, which owners are often unaware of. A house has to be clear of liens to transfer to a new owner, and all owners must agree to sell. Title issues rarely end deals, but can hold them up.
Tip: To head off such issues, title problems should be addressed before being listed or at least be in the process of being cleared before a home is listed.
Contingencies: Many buyers make offers contingent upon another transaction, such as their house, they currently own, successfully closing. Tip: If presented with a contingency contract take a good look at how solid the other deal is. For example if a buyer brings you a contract stating it’s contingent upon their house selling but their home is not even listed yet, this is not a good idea. Not too many contingent offers are being accepted in this market.
Once clearing all these hurdles, the good news is it is time to close on your house. The agents at First Coast Realty, Inc. prides itself on its strong listing presence. We list and sell more units than another agent or team of agents in our region. We have successfully negotiated and closed many homes and would love the opportunity to add your home to our list of success stories.