Unfortunately, just because home sellers have a signed purchase real estate contract does not mean that the deal is 100% and that the closing will happen on time. The home selling process is a process that many things can go wrong and delays are very common. There are many things that can delay or even kill the deal for home sellers such as issues with the title, home buyer mortgage denials, home inspection issues, and low appraisal issues. There are many cases where the home buyer will just decide on another home while he or she is going through the mortgage loan approval process. The home buying and home selling process can be both an emotional and stressful process and as long as everyone from the home buyers home sellers, home buyers realtors, home sellers realtors, attorneys from both sides, and mortgage lender are all on the same team and cooperate with one another, the closing process will go smooth and any obstacles during the process can be overcome.
Home Buyer’s Mortgage Loan Approval
Although the home buyer has presented the home seller with a written pre-approval by a licensed mortgage loan originator, the pre-approval is not a guarantee that the mortgage loan application will get a firm mortgage loan approval and a clear to close. Anything can go wrong during the mortgage approval process. A solid pre-approved mortgage loan borrower can get a flat out mortgage loan denial if he or she did something stupid like not make a monthly debt payment or bounced a bank check or buy a new car or quit their job during the mortgage application and approval process. The most intelligent mortgage loan borrowers do something out of the ordinary unintentionally that can affect a mortgage loan approval. Just because a mortgage loan borrower did something stupid during the mortgage approval process does not mean that the deal is completely dead. Everything can be worked out. I had a recent case scenario where one of my clients just quit her job after the mortgage lender did a verification of employment. She thought that once that the verification of employment was done, she was off the hook and can quit her job and move on to the new job. Mortgage lenders do a final verbal verification of employment prior to issuing a clear to close.
Home Buyer’s Mortgage Process
On this case scenario when the mortgage loan underwriter call the employer to do a verbal verification of employment, the employer told the mortgage loan underwriter that she quit a week ago. On this situation, we got lucky because my mortgage loan borrower got herself a new full time job. We needed to wait 30 days so she can provide us 30 days of pay check stubs and the mortgage loan underwriter had to do both a written verification of employment as well as a verbal verification of employment prior to issuing a clear to close. This mishap delayed the mortgage closing for 30 plus days due to the home buyer quitting her job prior to funding the mortgage loan. The delay affected the home sellers where they had to cancel their movers and the closing on their home purchase. Fortunately, this mishap was not a deal killer but just a 30 day closing delay.
Low Home Appraisal Issues
Home sellers need to be concerned that the home appraisal comes in at the purchase price value. In the event of a low appraisal, home sellers need to be prepared to lower their sales price. A home buyer’s mortgage lender will only base the home buyer’s mortgage loan on the appraised value and not the purchase price. If the appraised value of the home comes in at the purchase price amount, there are no issues but if the appraised value comes in lower than the contract purchase price, the mortgage lender will base the loan to value on the appraised value. For example, if the home buyer is approved for a FHA Loan and they have a signed purchase contract of $120,000 but the appraisal came in at $100,000, the maximum loan to value on a FHA loan is 96.5% so the mortgage loan the home buyer will get is $96,500. The home buyer needs to come out of pocket the extra $20,000 if the home seller demands the full $120,000. Most FHA home buyers barely have the 3.5% down payment so on cases like these, the home sellers need to lower the contract sales price to the appraised value or the deal will not happen. On cases of low home appraisals, there will be a delay in closing the mortgage loan due to the time it involves on either doing an appraisal rebuttal, renegotiation, or amending the sales contract.
Title Issues Can Also Be Cause Of Delays For Home Sellers
Home sellers need to make sure that there are no liens on their titles. Mortgage lenders require title insurance to protect their asset. The home is the mortgage lenders assets and any cloud or defects in the title will cause a closing delay until the title is clear of any liens.
Home Inspection Issues
Most home buyers will get a home inspection done. If the home inspector comes up with any defects on the home, the home buyer may either cancel the purchase offer or may require the home seller to correct the issue or want a credit on the repairs that are needed. If the repairs involve safety and security issues, the home may have a hard time passing appraisal inspection as well. These factors can also be causes for delays in mortgage loan closings.
Do Not Schedule Movers And Closing Until You Get Clear To Close From The Home Buyer’s Mortgage Lender
Both home buyers and home sellers normally get really antsy towards the latter part of the mortgage approval process and many schedule movers and a closing date prior to a clear to close. Nothing is wrong to schedule a tentative closing date and tentative date for movers but do not do a firm commitment because last minute hiccups always happen. If you are currently renting and your landlord has new tenants moving in on your tentative closing date, that can create a major problem. Make sure that you always have plan B in the event of a closing delay.