You’ve just negotiated a deal with a buyer and have a signed sales contract. The good news is that you’re almost there. The bad news is the finish line is still not as close as you think. Even though you and the buyer have agreed upon a price, there’s still room for the deal to fall through. Two big parts of the transaction still lay ahead – the inspection and the buyer’s mortgage.
With most standard sales contracts, the buyer will request that they be allowed to perform a home inspection. If this inspection isn’t satisfactory to the buyer, the deal could die right there. There are three major types of inspections that the buyer can have completed.
- Termite Inspection. Depending on your state’s laws either you or the buyer could be responsible for the termite inspection. If it is your responsibility as the seller, then you must have a letter from a licensed pest control company that states your home does not have any termites. Whether you or the buyer pays for the inspection, it is your duty to clear up the problem before closing.
- Roof Inspection. Should the roof inspection result in repairs to be completed, you are required to cover the repairs.
- General Inspection. This is an inspection of major appliances, air conditioning, heating, plumbing, and electrical systems. As the seller, you are required to repair or replace any of these items that fail inspection.
Avoid inspection problems by having your own inspection completed before you put your home on the market. That way you have time to make the repairs before a buyer’s inspector catches them.
Alternatively, you could sell your home “as is.” Such a stipulation must be included in the sales contract and lets the buyer know that you won’t be fixing any problems that may arise from any inspection.
The major drawback to selling your home “as is” is that any potential buyer will assume that you know of problems in your home that are too expensive for you to fix, thus making them extremely reluctant to want to even make an offer. If they do, don’t be surprised if it’s significantly lower than your asking price.
Mortgage Pit Falls
Your buyer’s ability to purchase your home is contingent upon his or her approval for a mortgage. If the buyer does not get approved for a mortgage that’s large enough to purchase your home, the deal will fall through unless you’re willing to lower the purchase price. Without financing, it is impossible for the buyer to purchase your home.
What can you do to avoid this problem? Make sure all buyers are pre-qualified before you begin negotiations. Ask prospective buyers for a pre-approval letter from a lender. Serious buyers will already have gotten pre-approved for a mortgage. Make sure the amount the buyer has been pre-approved for will cover the sales price of your home.
You might also work with the buyer to obtain financing. If you are working with a real estate attorney, he or she might be a resource that can assist the buyer in contacting a lender or mortgage broker. Alternatively, you can contact a local real estate agency to get recommendations on lenders or brokers.
Just because they’ve been turned down by one lender doesn’t mean that another won’t approve them for a loan. Be patient and keep working.
As a Realtor I’ve seen my fair share of home sales fall through because of failed inspections and lack of financing.
As an owner, you’re in control of the inspection. You can choose to fix any and all problems that an inspector finds.
Financing on the other hand requires a significant amount of faith, and often times hope. So while you’re waiting for the a buyer’s financing to be approved keep your home on the market and continue to work for offers in the hope that you can end up with a secondary offer that you can fall back on if the original offer falls through.