What could possibly go wrong?
A contract is signed and buyer and seller are excited. But both parties should take a deep breath, because there's still a long way to go. Unfortunately, sometimes real estate transactions that begin smoothly unravel for any number of reasons. When you're aware of these potential problems, it's possible to avoid them.
A buyer is entitled to change his mind
The residential contract includes a termination option. A buyer pays for that option as a means to get out of the contract for a certain number of days. The amount the buyer pays and the option length are negotiated by the parties. The buyer's right to terminate the contract during the option period is unrestricted. That means he can call the whole thing off for any reason whatsoever. A prospective buyer may get cold feet, change his mind, find a different property he prefers or discover something about the property he didn't know when he negotiated the contract. Or he doesn't even have to give a reason.
Upon closer inspection ...
Speaking of learning new information about a property, most buyers hire a professional inspector to thoroughly examine the home and identify problems. Most of the time, this occurs during the option period. When an inspection turns up something significant, the buyer may decide to exercise his option or decide that he wants to proceed. He also may try to amend the contract, either by changing the price or by getting the seller to make repairs at the seller's expense. Obviously, this introduces elements that can disrupt the transaction or terminate it altogether.
Show me the money
It's not enough for a buyer to tell the seller how much he'll pay for the home. If the purchaser isn't able and willing to pay cash for the property, he will need a mortgage. And if he can't get that financing, the deal is off. What happens next when a buyer cannot secure a loan depends on how the contract was filled out. In some instances, the buyer may be on the hook for the earnest money - sort of a good-faith deposit - he paid. In other cases, the buyer will receive a refund of the earnest money.
It's just not worth it
Even if a buyer can qualify for the loan amount, the property may not. That is, most lenders require an appraisal of a home prior to making a loan. The lender wants to know that the collateral for the loan - the property itself - is actually worth the purchase price.
What's in a title?
Some homes have title problems that can stop a transaction in its tracks. Perhaps there's a lien on the property or an easement that affects the property owner's quality of life. There may even be a claim that the person selling the home isn't the true owner after all.
The list goes on ...
As you can see, there are many ways a promising real estate deal can collapse. Add the following to the list above: agreed-to repairs that the buyer deems unsatisfactory (or that aren't made at all); a surprise during the final walkthrough of the home, such as an item that was supposed to convey that is no longer in the home; a sudden request right before or at closing; and plain-old default. Whether you are a buyer or seller, your Realtor can help you avoid these scenarios and give you sound advice when a potential deal-killer does arise. Sometimes, your Realtor may suggest you turn to a lawyer, inspector, engineer or other professional for assistance; other times, your Realtor may be able to put things back on track with a phone call or two. Either way, it's comforting to have someone on your side to help you achieve your goal of buying or selling a home.
Whether you're interested in buying your first home, your next home, or just want to know more about home-ownership in general, I encourage you to check out a couple of great online resources: http://www.texasrealestate.com/ or http://www.har.com/ and for all of your Pearland TX and Northern Brazoria and Galveston County real estate needs, please visit my site at http://www.danfrankrealty.com. All of these sites offer tons of useful, real estate-related information geared specifically for Texans.
Danny Frank is a local Pearland TX Real Estate expert
This column was published in the 24Aug08 edition of the Galveston County Daily News