The sale of your home requires a million little details to come together without a glitch all the way through the final signature. In fact, 32% of settlement delays come from buyer financing issues which can crop up at the very last minute.
So we asked a top agent in the field who’s facilitated 751 real estate deals all about what can go wrong at closing, and how to best prevent problems from arising in the first place.
To be clear, some steps throughout closing will be out of your hands. But by anticipating snags rather than reacting to them, you can expect the unexpected, over-communicate, and act swiftly to take care of any problems right away.
“It’s just a matter of communication between myself and the other agent to make sure that, number 1, if there’s an issue that’s happening, we see a red flag, then we have to deal with that,” says Ray Chadderton, a top real estate agent in Tampa, Florida who sells more than 71% more properties than the average agent in his area.
“And for the seller, we need to know as soon as possible because we don’t want to keep a house on the market that isn’t going to get to closing.”
Issue #1: Liens or debts clouding up your title
The title to your house is not a physical piece of paper but rather a collective term for all of your legal rights to own, use, and sell any piece of real property. Before you can sell your house, you have to “clear title” and prove that your ownership of the home is valid.
After you’ve accepted an offer, the title company involved with your home sale will perform a title search to identify any defects or “clouds” that cast doubt on the legitimacy of your title that may have been swept under the rug.
Outstanding county or property taxes, personal bankruptcies, divorce decrees, or contractor liens against your house are all examples of title issues that could pose a delay.
That re-roofing or remodeling job that you didn’t pay off from a couple months ago? That could show up as a lien preventing you from clearing title. The idea is that a buyer doesn’t want to inherit any of your unpaid debts by way of purchasing your home.
Sometimes clearing up title is as simple as verifying that a debt has been paid and recorded correctly, the same way you would clear up errors in a credit report. Other times, addressing outstanding debts can take months to settle.
Overall title issues account for 11% of closing delays and may come to you as a surprise.
Before you put your house on the market, be sure to pay off any debts, loans, and taxes that may show up as a title defect against your property.
“An unclear title is between the title company and/or the real estate attorney, whoever is handling it with the seller,” advises Chadderton. “You want to deal with that as early as possible in the transaction.”
This might mean sitting down with a real estate attorney or working with a title company to review all of your housing documentation, deeds, wills, and property tax statements before you even list your house.
An experienced legal professional can help you address these issues upfront for a smoother closing process.
Issue #2: Final walkthrough surprises
About a week before closing, the buyers of your home will come by for a final walkthrough to make sure the house is in the condition they expect it to be prior to taking possession.
If all goes well this step will be nothing but a formality. What you don’t want is the buyers frantically texting their agent during the walkthrough: “Where’s the refrigerator? When did this 5-foot gash on the kitchen counter happen?”
If you took down the window treatments or hauled the stove into the back of your truck without communicating that plan with your buyers, that presents a problem. As does failing to complete any repair work you agreed to during the home inspection negotiations. If you told the buyers you’d update all your non-compliant outlets to GFCI, then they’d better be installed before the walkthrough.
Same goes for if your water heater goes kaput between contract and close—so long as you’re still the owner, buyers will expect the home to be functional and your mechanics to be in good working order when they do their final check.
Your agent should be in constant communication with the buyer’s agent as soon as your home goes under contract.
Every little decision about who’s keeping what needs to be laid out in writing. Are you leaving the window treatments? Are you taking the fridge and wardrobe? All of those details should be explicitly clear in the purchase agreement and disclosure forms depending on your state.
It’s equally important to have a clear verbal discussion about what you’ve agreed to. The truth is there’s a ton of paperwork involved in a home sale, and it’s possible you won’t retain every single line of information.
A conversation about the big negotiations—like the fact that you’re taking your gas range Viking stove with you, or that you plan to fix the wood rot developing on your home’s exterior—helps make sure everyone is on the same page.
Go over this comprehensive final walk-through checklist from Nationwide, one of the largest insurance companies in the U.S., to start thinking like a buyer and help prevent a last-minute disagreement.
Issue #3: Move-in day miscommunications
You’re packing up the last couple of boxes and on track to move out by tomorrow when you spot the orange U-Haul pull up at your front curb. Uh oh…your buyer assumed you were already moved out, and they’re ready to start moving in right now.
It sounds crazy, but it happens more often than you’d think—the seller and buyer get their signals crossed about move-in day timing.
“I’ve had people literally crying in the driveway, moving vans in the driveway, and the other people haven’t moved out yet,” said Nicole Solari, a top 3% ranking real estate agent in Fairfield, California. “And conflicting times. Just lack of coordination, and lack of communication, is the biggest thing.”
Unless otherwise specified, buyers typically assume possession of the house after they wrap the final closing signatures. If you need to allow more time for packing and moving, that’s OK, but your plan must be clearly communicated to the buyers both verbally and in writing.
You and the buyer need to agree on a specific date and time—such as, Saturday, June 16, 2018, at noon—when the buyers can expect you to be 100%, totally gone.
The date needs to be in clear, bold writing and confirmed in discussions. Be prepared to negotiate and compromise on a time that works for everyone.
Issue #4: Mortgages and finances falling through at the last moment
It’s possible that your buyers’ ability to qualify for a loan could fall through before closing.
Say your buyers lose their sole source of income unexpectedly or went on a shopping spree to furnish the house before signing the closing documents—that increased debt load could cause a lender to question their ability to keep up with mortgage payments.
Buyer financing issues cause over a third of closing delays and may put your sale at a stalemate.
Unfortunately, there isn’t much you can do to prevent your buyer from dropping thousands on a new BMW before closing. You also can’t predict whether your buyer will keep their job during the home sale.
During pre-qualification, a lender will check on a buyer’s overall financial picture, including their debt and assets, to give them an idea of how big of a loan they qualify for.
The pre-approval process is more in-depth and requires an official mortgage application as well as an evaluation of a buyer’s credit score and credit history. This is a more accurate indicator of whether they are financially capable of purchasing your home and following through with the sale.
“You want to always make sure that the buyers are pre-approved and that you’re following all your timelines so you have the pre-approval,” says Chadderton.
Keep yourself in the loop and have your agent consistently follow-up with the buyer’s agent so that everyone knows what’s going on.
Issue #5: A missing Closing Disclosure form
The Closing Disclosure (CD) is a chunk of paperwork that outlines the terms of the buyer’s loan and any other closing costs associated with the sale. The title company or mortgage lender must send the CD to the buyer no later than three days before closing so that they can review it thoroughly and understand what they’re signing up for.
The closing can’t go through unless the disclosure is sent to the buyer and signed on time. That means if your closing is scheduled for Friday, the buyer must have the CD in hand by Tuesday or you’ll have to reschedule the final paperwork.
Make sure both your agent and the buyer’s agents are in touch with the title company consistently. They can call, receive updates, and get a set date on when the closing disclosure is guaranteed to go out so that no one’s time is wasted on closing day.
Issue #6: Wrong middle names and other document errors
When you get to the table and finally put pen to paper, you won’t have the time to read line by line every document that lands on your table.
Misspelled names, wrong addresses, and fees tacked on that you weren’t anticipating are all document errors that can be avoided from the start.
Request documents in advance to preview before signing day. This means you can read any loan documents, the CD, and the ALTA settlement statement (aka closing statement) that lists each and every fee the buyer and seller are subject to way before the day of closing.
If any errors crop up, hire a real estate attorney who will read the fine print and help settle any issues so that your closing day won’t be delayed further.
In addition, communicate with your real estate agent to understand what’s happening behind the scenes with the title company and attorneys involved.
Issue #7: Buyer’s remorse
It’s the day before closing and you’re waiting for the buyer to finish the final walkthrough. All of a sudden, the buyer gets cold feet and they want to call off the transaction.
For whatever reason, due to a change in finances or nerves, the buyer of your home is experiencing buyer’s remorse.
Though this isn’t something within your control, you might be thinking—how did I not see this coming?
Once you accept a buyer’s offer, they will be required to give you an earnest money deposit to show that they are fully committed to following through on the purchase of your home. If all goes as planned, the earnest money goes toward the total amount the buyer owes at closing.
But the deposit is like collateral: If the buyer chooses to walk away outside the scope of their contract contingencies, they will lose that earnest money and you will pocket it for the trouble and time they’ve wasted.
One way to help prevent a bad case of buyer’s remorse is to request the buyer put down a bigger earnest money deposit. Some earnest money deposits can be as small as $1,000-$2,000—it all depends on your location, the value of your home, and the buyers’ financial situation.
But if the buyers are truly planning to put down 15%-20% at closing anyway, then coughing up more earnest money should be no problem.
That lets you know they’re serious; plus, if anything falls through, you won’t leave the deal completely empty-handed.
Issue #8: Seller’s remorse
As you’re packing up the life that you’ve spent in this home, you might start to think that selling your house was a grave mistake.
The closing process becomes an emotional ride that could lead to seller’s remorse. You might think that this was too big of a financial risk and you don’t want to regret this transaction for years to come. Before you know it, you’re calling off the sale and canceling the movers.
Do a gut check before you list your home, not after.
- Is this something you really want?
- Are you emotionally prepared to leave this home and the memories it holds behind?
- Will you accept critiques on what needs to be fixed and treat this sale like a business deal?
- Are you equity positive? Do the math to find out how much money you can expect to take home.
- Are you in a financial position to find a home that better suits your needs at this stage of life?
With the right mental, emotional, and financial preparation, you’ll be less likely to feel seller’s remorse.
Issue #9: Unexpected death of the buyer
This situation is like a story that family members or friends have told, but doesn’t seem like it will ever happen to you… until it does.
If the buyer of your home passes away before closing, there isn’t much else you can control other than dealing with the ramifications. What you can do is have your documents in place so that the sale isn’t delayed for too long.
A personal representative of the buyer must act in their place to see that the transaction is complete and closing happens.
In circumstances like these, if the buyer passes a couple days or weeks before the closing date, speak to your real estate agent and real estate attorney who will communicate with the buyer’s side and negotiate a later closing date.
Remember, everything in real estate is negotiable. So say the buyer passes away but is survived by their spouse who no longer wants to go through with the sale. There may be a case where, out of compassion or empathy, the seller would void the contract at the spouse’s request.
Don’t assume it’s over until the ink dries on the final signature
In opera, in sports, and in real estate, one thing holds true: It ain’t over till it’s over.
No matter how prepared you are, a hooligan could pull the fire alarm at intermission, your favorite team could lose the game on a last-minute touchdown, or the buyer could walk away from the sale of your home.
Make up for what you can’t control by hiring an experienced real estate agent who will have seen it all before and handled the craziest crisis you can imagine, whether it’s missing furniture, unexpected fees, move-in day mixups, or the buyer’s mortgage falling through the day before closing.
“It’s very important that [everyone] communicates and be forthcoming with all of their information so that they don’t have hiccups at the end of the process,” Chadderton says.
Be prepared for anything to go wrong at the 11th hour, but prevent what you can by confirming every detail and agreement twice for good measure. Don’t sit back and relax until you’ve handed over the keys!