Common Delays in Real Estate Transactions
At times, surprises can be good, but in other cases they’re not. When it comes to investing in real estate, we like to ensure as much certainty as possible. There’s nothing worse than thinking you’re about to lock-in a deal just before something goes wrong and throws the entire thing off course. Whether you are the buyer or seller, it’s always good to be aware of what could go wrong before it actually does. This way, you may be able to prepare yourself and attempt to save the deal before it is too late.
Delays in the closing process due to missing documents or other errors. Depending on the nature of the mistake, it may or may not significantly delay the transaction. Even small errors such as spelling mistakes on a form can lead to unwanted delays. It’s best to make sure you are prepared and everything is filled out accurately. Hopefully the other party will do the same.
Appraisal is much lower than you expected. This can affect two situations related to the transaction at hand. First of all, it typically has financing implications and secondly, it can call for a new round of negotiations. However, in this case you can always request a second appraisal if there are other comparable homes in your area that are more valuable than the appraised value.
Lack of transparency from a party. This is never something you want to experience in a real estate transaction as it generally suggests that one party is trying to hide something. Depending on the nature of what’s being hidden, the deal could simply be delayed, renegotiated or abandoned altogether.
Rigidity when it comes to negotiation. If you are working with a real estate agent, it is wise to let them handle the negotiations. Not only are they skilled at the process itself, but they can sense ifa potential buyer or seller is not worth the trouble. This could include unrealistic offers in terms of low buying prices or high expected selling prices. It can be a hassle to seek another buyer/seller after already having gone through the rest of the process, but you have to ask yourself – is it worth sacrificing potential profits?
Revelations during the title search process. One example is discovering a lien on the property. This means that the current homeowner of the property has an outstanding debt that must be settled. Until it is resolved, the transaction can’t move forward. Depending on the nature of the lien and amount of the debt owed, the transaction could be postponed indefinitely.
Property cannot be insured. This is mainly a concern if you are trying to secure a mortgage to purchase the property. For one reason or another (including problems with the title mentioned above), a property may not be insurable. Of course, this is a call for trouble. Generally, it means that a property requires extensive repairs before it can be insured. When a property is uninsurable it means that you generally cannot qualify for a mortgage unless you meet special conditions. However, if you are financing the transaction without a mortgage then you may be able to avoid this challenge.
One party backs out of the deal. This could happen for a number of reasons, but hopefully you won’t have to experience it. The best way to avoid this is to be forthcoming with the opposite party and make sure everything is done according to standard. Sometimes people change their minds and you can’t help that.
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