It’s the night before your home closing and your broker calls and says she was just notified by the lender there is a problem with the title and closing is postponed. The moving trucks on both ends of the transaction are ready to roll, your buyer’s son has already signed up for his new soccer team and everyone involved is having a breakdown.
Last-minute issues come up in almost every real estate transaction and title problems can be the most difficult to deal with. The best way to avoid the drama is to be prepared and be proactive, whether you’re the buyer, the seller or the real estate professional.
If you’re the seller and you have had any kind of county permit pulled for work performed in your home, like a new air-conditioning system or plumbing work that required a permit, make sure that the company that pulled the permit has sent a release to the county closing out an open permit. Same thing if you are having a debate with a contractor and are withholding funds; they may have put a “mechanic’s” lien on the property until they have full payment. Best to get this settled and the lien released before you go into contract with a buyer. Of course, the ultimate title issue is when one of the buyers becomes seriously impaired or passes away. Legal issues and delays will naturally follow, putting the transaction in jeopardy.
Another big derailment issue is financing. A contract for a real estate sale that involves financing will state how much money the buyer is financing and a time frame for application and approval, as well as the amount of earnest money being collected. To avoid any issues with a buyer not qualifying for a mortgage, all buyers requiring financing should be prequalified for an amount equal to the purchase price and amount of funds being borrowed.
The next big issue when working with a buyer who is financing is the property appraising. We are in such an evolving market, with sales numbers going up daily, that determining the appraised value is like trying to hit a moving target. Since appraisers can only use closed properties in their analysis and not properties for sale or under contract, it’s not surprising that appraisals come up short. Buyers need to be prepared in the event this happens to them. Having more cash ready to put down a larger down payment is generally the best thing to do, but in this market, don’t expect the seller to renegotiate the price down.
Engineer inspections are notorious for derailing a sale. Sellers have to get all their ducks in order, making sure the appliances, HVAC, roof and plumbing are in working order if that is what you represented to the buyer. And, at the time of the final walk-through, everything the buyer expects to be there under the contract should be there and working. This includes a buyer expecting the property to be broom clean. More than one transaction has fallen apart at the last minute because the dishwasher quit the night before.
Finally, if the buyer and seller have negotiated personal property to be conveyed with the sale, all parties should be clear on what they are. The more detail you can include in the original contract, the better it will be at the end. If you’re leaving two refrigerators, specify color and model; and if you’re leaving the family room furniture, try not to have your new puppy chew one of the legs the week before closing.
Many of the last-minute problems can be avoided with just a little planning. Don’t let the sales train get off the tracks – once it does, it’s pretty hard to get it back up and running.
