After a lengthy search for the right home for you, endless mortgage application forms, and tiring negotiations with the seller, you have purchased your dream home and are excited to move in! You signed your part of the purchase agreement, prepared your down payment, and are ready to celebrate your big purchase. However, you’re not out of the woods…yet. Until the deal has gone through, there is still the potential that this arrangement could fall through. Various closing problems could still arise, some which you can control, so you need to do your due diligence to prevent them from happening. Meanwhile, other closing problems could be out of your control. Here are some of the most common closing problems when buying a home, so you can prepare for anything.
Issues in Title
Before closing on a home, a title search must be conducted, and you must obtain title insurance. In most cases, homebuyers will hire a real estate lawyer to perform the search and secure the insurance, and if there are any issues with the title, the homeowner will be made aware before they close. Some issues commonly found in title include a federal or provincial tax lien, a claim on the property by a relative or co-owner, or a contractor’s lien.
Cannot Secure Insurance
The insurance records of a property contain details about previous claims made for the home. If in the past there was a major insurance claim for the home, insurance companies will flag the property as unworthy of coverage. Since buyers require insurance to purchase a home, there is a possibility that they will refuse to provide coverage because of these previous claims. If your insurance company refuses to cover a home you’re interested in, it may be best for you to reconsider buying the home.
Seller Backs Out
Another closing problem to be prepared for is if the seller attempts to back out. They are not entitled to their reasons, whether it be because they received a better offer, because they don’t want to make the repairs or modifications after an inspection, or because they changed their mind about moving. In the event this happens, you may be able to get any of your costs returned. Working with a real estate lawyer is the best way to protect yourself in cases of an unexpected backout attempt.
Buyer Backs Out
Buyer’s remorse is unfortunately another issue that affects closing. If suddenly the buyer gets cold feet as the closing date approaches, they may want to call the whole thing off. Whether they’re nervous about the financial toll or found something they didn’t like about the home, the seller can be caught off guard by this sudden change. The good thing about a deposit is that it helps to secure and show that a buyer is committed to following through with the purchase. It works like collateral—it solidifies the buyer’s commitment to the sale but operates as a consequence if they suddenly choose to walk away outside of their contract permissions. They will lose the deposit and the seller will keep it for the trouble and time spent and the buyer may need to pay damages beyond the deposit.
Final Inspection Shows Flaws in House
It is common to perform home inspections on a prospective home to look for any pest infestation and structural problems with the home. Even if an inspection is not required, it is in a buyer’s best interest as it could identify issues that could be costly and time-consuming for a new owner. If the inspections reveal any major problems, it can delay the closing process while the buyer speaks with the seller about fixing the issues or reducing the asking price enough to cover the repairs. Ensure your purchase agreement has a clause that lets you walk away from the purchase if certain issues arise from the inspection.
A simple document error like incorrect spelling of a name, wrong addresses, and unexpected fees can also impact the closing of a home. Instead of waiting until signing day to review the documents, request them in advance so you can understand all the fees, terms, and information necessary to prepare for closing. If you notice any issues, your real estate lawyer can help settle them, so your closing day won’t be delayed any longer.
Financing Falls Through
Another problem when closing on a house is if the buyer’s qualification for a loan falls through before closing. For example, if the buyer was willing and prepared to close on the home, but suddenly lost their sole source of income or went into debt in preparation to furnish the home before signing the closing documents, this could cause the lender to question their financial responsibility. Financial issues cause most of the delays with closing on a home. The best solution is for the seller to find a buyer that is pre-approved for a mortgage, not simply pre-qualified. If they are pre-approved, it means they have had an official mortgage application and have been evaluated based on their credit score and history. Choosing a buyer with pre-approval will prevent this situation from occurring.
Hire Zinati Kay – Real Estate Lawyers for a Smooth Closing
Whether you want to buy or sell a home, it is important that you fully understand what you are signing up for before you close. Working with a real estate agent is helpful for the main aspects, but you will need a real estate lawyer to do the extra digging to protect you from any liabilities. They will ensure you know what you are getting when you buy or sell a home and offer valuable legal counsel. Looking for the right rea estate lawyer in Toronto to help you? We can help.
Zinati Kay – Real Estate Lawyers is a full service residential real estate law firm that provides fixed closing costs to our clients when they buy, sell, mortgage, or title transfer their property. We will ensure that you are fully informed as you make the biggest purchase of your life, and we bring over 22 years of experience to the table. If you want a professional real estate lawyer on your side, contact us at (416) 321-8267 for more information about our services.