3 Things that Could Cost You Your Dream House

demolitionhouse

People looking for their dream home or their first home always seem to expect things to fly right along and go smooth as silk. I am living in my second home now and I have yet to see a completely smooth process from sale to purchase, something just always seems to crop up. There are three major pitfalls which could possibly cost you your dream house.

Title Work

This is the true sneak attack in the real estate market. The title to your home is usually owned by your bank but that doesn’t necessarily mean they are the only ones who hold it hostage. There are several things that could affect the title to your future home and you may have no idea. If someone fails to pay for a debt the creditor could sue to have a lien put on their property to secure repayment of the debt. When the lien is placed on the home the title becomes “dirty” and the selling price of the home would have to both cover the amount of the lien as well as the outstanding mortgage on the home.  This could potentially make the sale of the house impossible because either the creditor with the lien or the mortgage company is going to have to accept less then they owe on the property.

This recently affected a friend who was trying to purchase a short sale house. The sellers failed to disclose a lien on the property, they claimed they didn’t know. The mortgage company accepted the short sale, the home inspection was completed, the appraisal was done and then it all blew up because a of a lien on the property. The sellers had already moved to Florida and sold my friend their fridge. My friend is now out close to $600 and has nothing to show for it.

Home Inspection

Home inspections are extremely important when buying a home. This goes just as much for new homes as older homes, you need to have an inspection. The good thing about the inspection is it will allow you to identify things wrong with the home that you otherwise may not have identified. The home inspector is trained to identify problems both major or minor with your prospective property. Most of the time your realtor will write into your purchase agreement that the sale of the home is contingent on the inspection. Following the inspection you can ask that the seller fix the items or you can walk away and in some cases it may be best to just walk away. Major structural issues with a home are expensive to fix and are not anything you want to deal with. It is always possible that you could lose your dream home because of termites or foundation issues, but at least you knew about it before hand because you got an inspection.

Underwriter’s

I first wrote about these mysterious creatures of the mortgage industry in my post what is a mortgage broker. Essentially they are the actual people responsible for determining whether or not an individual is worthy of receiving the loan quoted by broker/loan officer. It is unlikely that a loan would fall through in underwriting but the possibility exists. For all intensive intents and purposes you are not actually approved for a loan until you have been approved by the underwriters. The bad thing about it is that this usually one of the last things to occur and it occurs closer to the closing of the loan. If the mortgage broker or loan officer failed to do their homework your loan could fall through in underwriting and you could lose your dream house. So make sure you pick a broker you can trust not just the one that promises you the best rate.

Have you ever had a deal fall through because one of these problems, or do you know of one I missed, let me know in the comments.

{ 6 comments… read them below or add one }

1 Matt Jabs June 23, 2009 at 4:44 pm

When I went to sign my mortgage papers I went 4 hours early so I could “read them”. My agent told me they had never saw someone actually read through the entire agreement line-by-line & page-by-page. People REALLY need to heed this post!

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2 Kyle June 23, 2009 at 5:07 pm

I had a friend who did that, he actually had an error too, the rate was wrong and they were charging him points. I actually talk about that more in my post What to Expect When Closing Your Loan

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3 Wojciech @ Fiscal Fizzle June 23, 2009 at 9:32 pm

@Matt – Incredible, only the biggest purchase of your life (most likely) and most of us are clueless about what we’re signing? *Sigh*

A home inspection saved me from buying a home last year with serious undisclosed roof damage that needed immediate replacement of the entire roof. Sure, I spent $300 “for nothing” but that’s the cost of doing business, so to speak. If you are planning to buy a home, you have to plan for the fact that you may lose one or two on the way to your dream home.

Unknowingly, that little roof snafu also saved me from a much costlier mistake – entering the real estate market about $100,000 too high. Ouch! Still looking for that dream home…

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4 Sharon Heritch July 29, 2009 at 10:43 pm

The phrase is ‘for all intents and purposes.’

— Grammar geek, at your service.

And btw, a good post. 🙂

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5 Kyle July 31, 2009 at 12:03 am

Thanks for the heads up, I need a grammar geek to keep me in check.

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6 Coosrhodes March 29, 2013 at 6:32 pm

My loan fell through on my dream home. It turns out that the underwriters didn’t believe that I was gonna rent my current home. My husband and I are devastated.

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