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You think you’re in for smooth sailing once you’ve agreed on the sales price, escrow deposit, exclusions and closing date. You feel even a big smug once the house passes a builder’s inspection and contingencies are removed. But don’t get too comfortable with the idea that you’ve bought or sold a house just yet. Until a check is handed over at the closing, there are snafus that can cause the sale to crater.
But if you stay focused on the ultimate goal – to sell or buy a house – there usually are solutions, though some may require a new closing date or some additional funds or a credit. Here are some common problems that may accompany a sale and solutions to get the deals done.
Seller removes possessions that were supposed to stay
New York attorney Lisa Breier had clients – buyers – who had heard a rumor that the sellers were taking away furnishings. When the buyers went for their walk-through before the closing, they discovered, lo and behold, that some kitchen cabinets and appliances were missing. The sellers denied knowing they weren’t allowed to remove the items. After a few conversations and with the closing postponed a week, the cabinets were re-installed. Solution: Take photos before the closing, always do a walk-through, emphasize exclusions.
Seller refuses to move out
At a closing for a New York loft, the buyers expected to receive the keys to their home. The surprising response from the seller was, “I didn’t realize I had to be out of the apartment,” recalls Breier. The closing was adjourned for a few days and another closing scheduled. When that came and went, Breier played hardball. Solution: Patience will work initially, but in this case Breier had to issue a Time of the Essence notice, which informed the seller that if she didn’t move out she’d be in default. Six months later, the seller moved.
Buyers qualify for a loan that no longer exists at closing
With the mortgage market in flux, it’s becoming more common that certain loans no longer exist. In the case of one transaction, mortgage/loan officer Tracey Rumsey of Bountiful, Utah, said the buyers had a mortgage for 100-percent financing based on their earnings. Solution: In that scenario, a buyer has to walk away from the sale or go back to their lender and ask for a loan based on a smaller percentage of their income, says Rumsey, author of “Saving the Deal: How to Avoid Financing Fiascos and Other Real Estate Deal Killers” (AMACOM, 2008). But an even better scenario is for buyers to go to a lender who preapproves them for a choice of loan options.
Sellers make unapproved changes
When Amy Gardner Cranston and her husband Brian purchased their first home, they discovered before the closing that permits hadn’t been issued for some completed work. To bring the work up to code, the sellers took extreme steps and removed walls and insulation rather than correct the problem. “They expected us to take possession of the house with one less usable room,” Amy says. Solution: The couple hired an attorney, and with help from their salesperson they showed that the sellers were in breach of contract. Gardener Cranston also believed that the photos she had taken of how the house looked at the time of the contract, as well as detailed notes about the inspection, helped them receive a credit to make the necessary changes.
Lost original documents
Without such important documents as the original note and mortgage, deed of trust or land contract, you can’t close, says Steve Hochman, president of Friendly Note Buyers Inc. in Roxbury, N.Y. Solution: First, the bad news. “There’s no simple solution, and this can derail a closing,” Hochman says. To resolve the matter, he suggests first asking the original closing attorney if he still has the documents, since he may have kept them inadvertently. If that’s not the case, go back to the original signers – possibly a bank, he says – create the lost affidavit and get the original note resigned, which may take time and require a new closing date. Better yet. know where all-important documents are at all times, especially before the closing.
Seller doesn’t own title
This can easily happen if an attorney or title company hasn’t run a search to see who’s on the title. Solution: If it’s a simple error and both a husband and wife’s name aren’t on the title when they should be, a quitclaim deed can be drawn up with the proper grantor and grantee names and a legal description of the property, says Georgia attorney Craig Long. If someone is selling the house for a deceased family member, be sure before the closing the seller has the legal authority to do so according to the will, with proof available. Long further advises a seller check the title before listing their house and a potential buyer request to see the title before signing a contract or shortly thereafter.
Appraisal is less than the negotiated sales price
This may happen more these days as house prices fall, making some buyers rethink their offers. Solution: A buyer may decide to renegotiate the sales price downward. To safeguard against 11th-hour disasters, broker/attorney Tara-Nicholle Nelson of Oakland, Calif., advises not removing the appraisal contingency until the bank underwriter has signed off on the appraisal.
Fatal buyer’s remorse
Though it may not occur often, Diane Saatchi, senior vice president with the Corcoran Group in East Hampton, N.Y., was involved in a transaction where the buyer decided before the closing not to proceed, blaming the decision on a poorly functioning furnace. The seller, her client, agreed to purchase a new furnace. The buyer still wanted to reneg. Solution: Because the market still was strong, the seller decided he could sell his home to someone else and returned the buyer’s escrow deposit. However, a seller might decide to make the buyer forfeit the deposit.
Special assessments add to price
Sellers are required to notify buyers about special assessments that arise and usually prorate them or assume the expenses to sell their house. But some sellers may disagree since they feel that they won’t benefit and want these costs passed on to the buyers. Who pays – or doesn’t – can undo a deal, says Janice B. Leis, associate broker for Prudential Fox & Roach in Rosemont, Pa. Solution: She recommends delicately presenting the request. “Pick your battles,” she says. “Because of the number of houses on the market, most sellers now feel lucky if they have a qualified buyer and assume the assessment costs or at least ask to split them.”
Loan denied because of bad debt-to-income ratios
Once they’re approved for a mortgage approval, buyers may go on a shopping spree, maxing out their credit card, which changes their debt-to-income ratio, says Julie Nolan, owner of Assist-2-Sell Best Choice in North Port, Fla. “We have had denial letters come two days before closing because of this!” she says. Solution: Buyers shouldn’t apply for new credit cards, make major purchases on credit, change jobs or quit a job prior to closing.
Copyright © CTW Features
But if you stay focused on the ultimate goal – to sell or buy a house – there usually are solutions, though some may require a new closing date or some additional funds or a credit. Here are some common problems that may accompany a sale and solutions to get the deals done.
Seller removes possessions that were supposed to stay
New York attorney Lisa Breier had clients – buyers – who had heard a rumor that the sellers were taking away furnishings. When the buyers went for their walk-through before the closing, they discovered, lo and behold, that some kitchen cabinets and appliances were missing. The sellers denied knowing they weren’t allowed to remove the items. After a few conversations and with the closing postponed a week, the cabinets were re-installed. Solution: Take photos before the closing, always do a walk-through, emphasize exclusions.
Seller refuses to move out
At a closing for a New York loft, the buyers expected to receive the keys to their home. The surprising response from the seller was, “I didn’t realize I had to be out of the apartment,” recalls Breier. The closing was adjourned for a few days and another closing scheduled. When that came and went, Breier played hardball. Solution: Patience will work initially, but in this case Breier had to issue a Time of the Essence notice, which informed the seller that if she didn’t move out she’d be in default. Six months later, the seller moved.
Buyers qualify for a loan that no longer exists at closing
With the mortgage market in flux, it’s becoming more common that certain loans no longer exist. In the case of one transaction, mortgage/loan officer Tracey Rumsey of Bountiful, Utah, said the buyers had a mortgage for 100-percent financing based on their earnings. Solution: In that scenario, a buyer has to walk away from the sale or go back to their lender and ask for a loan based on a smaller percentage of their income, says Rumsey, author of “Saving the Deal: How to Avoid Financing Fiascos and Other Real Estate Deal Killers” (AMACOM, 2008). But an even better scenario is for buyers to go to a lender who preapproves them for a choice of loan options.
Sellers make unapproved changes
When Amy Gardner Cranston and her husband Brian purchased their first home, they discovered before the closing that permits hadn’t been issued for some completed work. To bring the work up to code, the sellers took extreme steps and removed walls and insulation rather than correct the problem. “They expected us to take possession of the house with one less usable room,” Amy says. Solution: The couple hired an attorney, and with help from their salesperson they showed that the sellers were in breach of contract. Gardener Cranston also believed that the photos she had taken of how the house looked at the time of the contract, as well as detailed notes about the inspection, helped them receive a credit to make the necessary changes.
Lost original documents
Without such important documents as the original note and mortgage, deed of trust or land contract, you can’t close, says Steve Hochman, president of Friendly Note Buyers Inc. in Roxbury, N.Y. Solution: First, the bad news. “There’s no simple solution, and this can derail a closing,” Hochman says. To resolve the matter, he suggests first asking the original closing attorney if he still has the documents, since he may have kept them inadvertently. If that’s not the case, go back to the original signers – possibly a bank, he says – create the lost affidavit and get the original note resigned, which may take time and require a new closing date. Better yet. know where all-important documents are at all times, especially before the closing.
Seller doesn’t own title
This can easily happen if an attorney or title company hasn’t run a search to see who’s on the title. Solution: If it’s a simple error and both a husband and wife’s name aren’t on the title when they should be, a quitclaim deed can be drawn up with the proper grantor and grantee names and a legal description of the property, says Georgia attorney Craig Long. If someone is selling the house for a deceased family member, be sure before the closing the seller has the legal authority to do so according to the will, with proof available. Long further advises a seller check the title before listing their house and a potential buyer request to see the title before signing a contract or shortly thereafter.
Appraisal is less than the negotiated sales price
This may happen more these days as house prices fall, making some buyers rethink their offers. Solution: A buyer may decide to renegotiate the sales price downward. To safeguard against 11th-hour disasters, broker/attorney Tara-Nicholle Nelson of Oakland, Calif., advises not removing the appraisal contingency until the bank underwriter has signed off on the appraisal.
Fatal buyer’s remorse
Though it may not occur often, Diane Saatchi, senior vice president with the Corcoran Group in East Hampton, N.Y., was involved in a transaction where the buyer decided before the closing not to proceed, blaming the decision on a poorly functioning furnace. The seller, her client, agreed to purchase a new furnace. The buyer still wanted to reneg. Solution: Because the market still was strong, the seller decided he could sell his home to someone else and returned the buyer’s escrow deposit. However, a seller might decide to make the buyer forfeit the deposit.
Special assessments add to price
Sellers are required to notify buyers about special assessments that arise and usually prorate them or assume the expenses to sell their house. But some sellers may disagree since they feel that they won’t benefit and want these costs passed on to the buyers. Who pays – or doesn’t – can undo a deal, says Janice B. Leis, associate broker for Prudential Fox & Roach in Rosemont, Pa. Solution: She recommends delicately presenting the request. “Pick your battles,” she says. “Because of the number of houses on the market, most sellers now feel lucky if they have a qualified buyer and assume the assessment costs or at least ask to split them.”
Loan denied because of bad debt-to-income ratios
Once they’re approved for a mortgage approval, buyers may go on a shopping spree, maxing out their credit card, which changes their debt-to-income ratio, says Julie Nolan, owner of Assist-2-Sell Best Choice in North Port, Fla. “We have had denial letters come two days before closing because of this!” she says. Solution: Buyers shouldn’t apply for new credit cards, make major purchases on credit, change jobs or quit a job prior to closing.
Copyright © CTW Features
