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.
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 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.
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.