Why Real Estate Closings Fall Apart
There is an old saying in retail business that a sale is not made until the cash is in the register. The same is true for real estate deals that fall apart when it comes to the closing. The closing is a dangerous time for a real estate transaction because so many things can go wrong.
There are many reasons as to why real estate closings can fall apart and destroy what seems to be a perfectly good deal. From cold feet to unexpected expenses to simple misunderstandings, the closing is a rocky place that must be navigated smoothly in order for the sale to progress.
How Closings can Fall Apart
With so many reasons why closings fall apart, the biggest seems to be access to the loan credit needed to secure the actual mortgage. Arguably a condition of the bursting of the real estate bubble in 2008 when rocketing home prices suddenly dropped and left many thousands of people underwater or owing more on their mortgage than the home was worth. This condition is still pervasive in banks today that are reluctant to provide mortgage loans even to those with good credit.
Issues of financing and tight credit control by the banks and lenders are the cause for more than one-third of the collapses of real estate deals in the closing process just in the month of August, 2014 alone. While that number can vary from month to month, a wise move of the buyer would be to get pre-approved for a mortgage before reaching the closing stages. At the very least, if they buyer was not approved it would still be early in the process.
Negotiate the Price: Another reason which is a fairly common one is the negotiations over the price of the home itself. Even in a market where sellers are desperate to get rid of their homes, this is a surprisingly high figure which may have to do with the inability to accurately judge the value of the home itself.
Poor Appraisal: This is another issue as to why real estate closings fall apart is the appraisal price seems to be considerably off from the home’s actual value. Disagreements over appraisals often cut off negotiations because of their controversial value which either takes into account items that the buyer does not or worse, doesn’t account for factors that the potential buyer is aware. This leads to disagreements and eventually walking out of the deal during the closing process.
Home Inspection Process: Another issue that has been a part of closings for many years. This is because the home itself may have issues that an inspector just discovers which may upset the buyer or something that causes a lender to back away from the deal as well. In any event, an issue uncovered by a home inspector during the closing process usually spells trouble for the sale.
Of course, there are many reasons why real estate closings can fall apart. What is important for buyers and sellers to remember is to get as much of the process completed and out in the open before the closing process can begin. Having all the issues about the property known early on can prevent surprises that wind up destroying the closing process.
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