Common Problems During a Real Estate Purchase – and how to Avoid Them
by Ed Kunkel, Jr., 11-year U.S. Military Veteran
There’s a 101 things that can go wrong in a sale, and it would take a novel or two at the least to explain it all. The process of buying a home is a journey, and you can anticipate challenges, frustrations, disappointments, excitement and eventual success! It’s impossible to know how to avoid every potential problem in buying a home, but it is possible to minimize the risk to your experience by knowledge-gathering, patience and persistence.
Do your due diligence! It’s a wonderful and sentimental thing to own a home, with all the benefits that come with it. Buying a home for the first time is a greatly rewarding and exciting experience. And as we get swept up in the romance of buying our first home, we need to keep at least one foot on the floor through the process.
Buying a home is a business decision first and foremost, you may love the home, but you may need to be mentally prepared to walk away for your own good if buying the home doesn’t make sense. Buyers have unfortunately been known to not take the time to do their due diligence before rushing to the closing table, and as a result, they learn after the fact that the home they bought was not a wise choice. Imagine buying a home, and learning later that the covenants won’t allow you to park your RV on your property. Or you find out after your purchase that there’s a level 3 sex offender living across the street from you.
Let’s say you negotiate with the seller that they paint the exterior of the home prior to closing escrow, and you pick the color of paint for the painter to use. You find out after the close of sale that the colors of exterior paint need to be approved by the homeowners association, the seller did not get that approval for you, and now you are being fined by the association. All of these mistakes can be easily avoided by doing your due diligence, and to process your business decision objectively.
Read your preliminary title commitment carefully. You should receive a copy of this within a few days of your offer being accepted. The title commitment is going to show you the liens on the property that are recorded, and they all have to be cleared as a condition of your purchase. If there is anything unusual or concerning on the report, such as a judgment lien or a mechanics lien, it may be a good idea to make sure the seller is aware of it. If the seller is not aware of the lien, or in dispute of it, that could be enough to cause the sale to fail. It all boils down to communication and clarifying intentions.
Know what you’re signing and make sure your information on the purchase contract is correct. Read your contract carefully and ask questions if you don’t understand something. And even more importantly, listen to what your agent is saying to you – do they also understand what you’re signing? Your purchase offer is most likely going to include contingencies and timelines to satisfy those contingencies. It’s important that both you AND your agent understand what you’re signing, and that you stay on track with what your contract says.
Is the lender you are using different than the lender name on the pre-approval letter that was originally submitted with your offer? You need the seller’s permission to switch lenders, this could cause your contract to be void. If your seller has a back-up offer for more money, and they are not in a hurry to finish escrow, do you think they would be motivated to use that lender oversight to void their contract with you? I can tell you that they wouldn’t be the first sellers in history to do this. Beware of signing contract forms that are not generated by the local MLS, such as a bank-owned purchase contract or a builder presale purchase contract, as MLS contracts are more geared towards protecting the buyer. Seeking the advice of an attorney if there is something you don’t understand is always an option for you, and you absolutely should.
Don’t buy anything during your loan application approval process! Your financial picture was carefully reviewed by your lender and their underwriting department for an approval to buy a home. If you decide to buy a new car while you’re waiting to close escrow, you will lose your approval status – don’t do it! Your file, including your recent credit report will be checked again before you get funding for your new home. Don’t run up your credit card, don’t buy new furniture, and don’t spend money on anything that isn’t already existing bills, gas and groceries until you close escrow.
Ed Kunkel, Jr. is a Managing Broker/Realtor® at Keller Williams Realty in Olympia, Washington. Visit Ed here. Ed’s Military History: Veteran – U.S. Army and Air Force Reserve; Highest rank, E5; 11 years combined military service.