Your Real Estate Sale: What Can Go Wrong
Buying or selling a home is serious business, especially in the Dallas-Fort Worth area, where the competition is stiff. If you’re looking to purchase or sell a home, it is a good idea to anticipate factors that could negatively affect a real estate sale.
Buying or selling a home is serious business, especially in the Dallas-Fort Worth area, where the competition is stiff. According to the Dallas Morning News, there’s a shortage of homes available for sale in DFW, since new construction slowed during the recent recession. The demand for homes outweighs the supply, which has created a very competitive housing market. So if you’re looking to purchase or sell a home, it’s a good idea to anticipate factors that could negatively affect a real estate sale, such as a lender backing out of the deal even if the party is preapproved, an appraisal that undervalues a home (thus affecting the loan amount), and home inspections revealing the need for repairs. The following are some common scenarios that can cause a real estate sale to go awry, and suggestions on how to prevent them.
Problem #1: Stricter Lending Policies Could Affect Your Loan
Since the housing bubble and subsequent recession, lenders have become more stringent on determining a buyer’s eligibility for a loan. In fact, MSN Real Estate notes that the financing process can make or break a real estate sale, and that lenders reject roughly 25 percent of all mortgage applications. To help remedy this issue, some buyers choose to undergo a preapproval process before making an offer on a house. (Keep in mind that although this can help increase the odds of a smooth sale, lenders can still deny a loan after pre-qualification.)
Problem #2: Low Appraisal Values Could Reduce Your Loan Amount
As a precautionary measure, most lenders require a third-party appraisal of the home’s value. This is done so that in the event of a foreclosure, the remaining amount left on the loan does not exceed the home’s fair market value. While an appraisal is an integral part of the purchasing process, an appraisal value that falls below the asking price will yield a smaller loan from the lender. According to Investopedia, an appraisal lower than the asking price will require either the seller to meet the appraisal value or the buyer will have to cover the difference in cash. A low appraisal may also convince buyers to abandon their offer and bid on another property.
Problem #3: Home Inspections Could Turn Up Results Requiring Costly Repairs
Even if a lender doesn’t require an inspection, it’s normally standard practice for buyers to have a home inspected prior to closing. A licensed inspector will assess the structural integrity of a house and evaluate the home’s plumbing and electrical systems. An inspection that reveals a previously unknown problem — such as a leaky roof or a cracked foundation — can result in extensive repairs, which can lead to further negotiations on the price or could even provoke buyers into walking away from the sale. Before listing a home, sellers should hire professionals to look for any issues that could affect plumbing, heating and cooling units, pest infestations, and structural problems. Armed with this knowledge, a seller can choose to disclose these problems and sell the home in as-is condition or pay for repairs prior to listing.
When purchasing or selling a home, an offer on a house will not guarantee a final sale. Issues and problems associated with the lending process, the appraisal, and the inspection are just a few of the most common snags that can make or break a real estate sale. Buyers and sellers should consult with professional inspectors and real estate agents when engaging in a real estate transaction to help minimize complications.
Want more information about the home-buying process? Learn more at Coldwell Banker.