These problems won’t necessarily derail the whole process. They have the potential to do so, but an experienced real estate attorney can help navigate these issues and find a way to continue moving forward.
It’s beneficial for both the buyer and seller in a real estate transaction to be aware of these potential issues. Mitigating any surprises helps everyone find a way to make the process as smooth as possible.
Here are the biggest potential challenges in high-end residential closings:
- Issues Found During Home Inspection
- Appraisal Doesn’t Match Price
- Problems With the Title
- Buyer or Seller Backs Out
- Securing Proper Financing
- Errors on Closing Documents
- Final Walkthrough Issues
Issues Found During Home Inspection
Home inspections are generally performed very early in the process after an offer is accepted on a home. An inspection is a very detailed process of looking over every aspect of the building. And occasionally, this inspection can unearth some previously-unseen issues.
Major structural problems, leaks, termite infestations, and other issues can grind the closing process to a halt. The seller will have the opportunity to rectify any issues that the buyer is unwilling to deal with. Larger issues can cause a buyer to back out of the process altogether.
Appraisal Doesn’t Match Price
The appraisal of the property will often have a large effect on the financing made available to the buyer. A home that is appraised much lower than the sales price won’t have the same potential for eventual return, so a lender is less likely to approve a higher loan.
A large discrepancy between the sales price and the appraisal can cause the buyer to need to find additional funding to complete the transaction. This could mean a larger down payment, or even sourcing the funding through an entirely different lender. Either way, this issue will probably translate into delays in the closing process.
Problems With the Title
The title of the property is essentially a document that proves ownership. A title search will be performed to inspect this document to ensure the person or persons selling a property have the legal right to do so.
This process can occasionally find issues with the title that will need to be figured out before the sale can be completed. This could include outstanding fees like taxes or liens. It could also include previously-unidentified co-owners such as a bank, relatives, or even the IRS.
Buyer or Seller Backs Out
The purchase agreement will outline justifiable circumstances in which either the buyer or the seller can legally terminate the contract prior to closing. This termination could be related to major issues found during inspections, financing issues, and more.
Satisfying all the necessary clauses and stipulations in the purchase agreement will greatly reduce the likelihood of either party backing out of the transaction. Unforeseen issues can always pop up, but sticking to your responsibilities will help make this outcome less likely.
Securing Proper Financing
High-end residential real estate transactions are going to be pricey. Most buyers aren’t going to have immediate access to the necessary funds to complete the transaction. This factor means additional funding — usually through a bank — will be needed.
Securing financing is one of the most essential aspects of the closing process. Failure to procure the necessary funds will immediately sink a transaction. It is the buyer’s responsibility to secure these funds prior to closing day.
Errors on Closing Documents
There are a lot of documents to fill out and sign for high-end residential closings. These documents need to be prepared with great attention. The assistance of an experienced real estate attorney is highly recommended.
The sheer amount of information to be provided can make it easy to misspell an item, or make other typographical errors. The simplicity of the errors, however, doesn’t make them any less costly. They will need to be corrected and the documents will have to be re-drafted, which can result in delays.
Final Walkthrough Issues
The final walkthrough is the last step before closing day. Buyers will visit the property to make sure everything looks the way it did when they saw it at the start of the process. They will also be checking to make sure any repairs that were requested have been completed.Uncompleted repairs or new problems can delay the closing process. This could include situations like the HVAC unit not working or leaks found in the roof. Any issues will most likely need to be rectified before the process can move forward.