3 reasons home purchases fail right before closing

On Behalf of | Jun 11, 2022 | Real Estate Transactions

Real estate transactions are very complex. They involve complicated financial instruments and two or more people with differing priorities. All sorts of issues can arise that derail the transaction even after the seller accepts an offer from a potential buyer.

If you know some of the more common issues that could bring your purchase or sale screeching to a halt, you can make better decisions about what properties to bid on or how to handle the process of listing your home.

Why do many modern transactions fail to reach the closing table?

An appraisal gap

If a seller asks too much for the property or if the buyer makes an offer that is unrealistically aggressive, the appraisal might set a lower value for the property than the amount someone offered to pay for the property. An appraisal gap can affect financing and may prevent the buyer from following through with their offer.

Lack of housing

If the seller needs to buy a new home, they may underestimate how expensive the current market has become or how long it takes to have someone accept an offer. A seller who cannot find either a home to buy or a place to rent may end up backing out of the transaction because they have no place to move after selling their home.

Undisclosed property defects

Inspections and appraisals don’t just cause financial issues. They can also lead to the discovery of latent defects at the property. Issues ranging from bad wiring to problems with the foundation could change a buyer’s valuation of the property or make a lender unwilling to finance the property as-is.

When buyers and sellers understand the issues that could affect a real estate transaction, they can adjust their behavior to reduce their risk.