6 Things That Can Bring Your Home Closing to a Grinding Halt

published May 24, 2020
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Whether you’re purchasing a home or selling one, you’ll have to deal with something toward the end of your journey known as the closing. In short: It’s a lengthy process with a barrage of legal documents that must be signed before you move in.

Just because you’ve made it to the closing stage of the sale, though, doesn’t mean you’re home free. Ahead, find some of the things that can bring your closing—and the purchase or sale of your house—to a grinding halt.

The final walkthrough isn’t final

Buyers often ask sellers to make certain changes to a property, like repairs, before sealing the deal. Say “right before closing, the buyer has a final walkthrough, and they see that those repairs were not made, or they were made incorrectly,” notes Somerville, N.J., attorney Rajeh A. Saadeh. “So, the buyer may not want to proceed with the deal until those issues are resolved.”

He explains that once the seller’s furniture, rugs, and other items have been removed from a home, a buyer might notice new areas that need repairs. It’s important that buyers get a complete sense of what the home is like empty, and to agree with the seller on the terms of repairs before approaching the closing period. 

A low appraisal  

If there’s a bidding war, or a buyer feels they need to do something to stand out, they may pay more than the asking price. But if the buyer needs a loan for the home, the lender will want to do an appraisal, according to Kerry Adams, realtor at the Blumel Adams Group Compass Real Estate in Alexandria, Va. “If the property does not appraise for the sale price, the bank will only lend based on the appraised value,” she explains.

So, what does that mean for the buyer? “A buyer who is not protected with an appraisal contingency will need to make up that difference in cash.” And if the buyer doesn’t have that kind of money laying around? Adams says they could be in default. “Buyers should know before writing an offer whether there is a risk of an appraisal issue and what the ramifications are.” That’s why it’s a good idea to use an experienced buyer’s agent who understands the appraisal process.

A contingency clause

Some buyers are also trying to sell their current homes while they’re looking for new homes to purchase. In fact, they often need the money from their home’s sale to make a down payment on the new home. “A seller accepting a contract contingent on the sale of a buyer’s existing home can lead to the end of the deal,” says Jeremy Browne, senior vice president at TTR Sotheby’s International Realty in Arlington, Va.

In fact, he says sellers who accept this contingency have lost control of the deal, since it is now dependent on the other home closing. “Every transaction has its unique issues and roadblocks, and if problems arise that are insurmountable on the buyer’s transaction on the current home, the seller is left virtually powerless except to release the buyer from the contract.”

Even if the home the buyer is selling is under contract, something could happen to delay that closing, creating a ripple effect.

A lien on the property

You probably know that a lien on a property can prevent homeowners from selling their home. “However, one of the most recent things I have seen was a lien being recorded on the property while the property was in escrow,” says Jennifer Okhovat, a realtor with Compass in Los Angeles.

“Usually, we try to pull the title as soon as opening escrow and even review preliminary title reports prior to listing a home.” So, what caused this particular incident?  Okhovat says someone put a lien on the seller’s property and the seller—who was an out-of-state resident—was not aware of the lien. The seller’s two options were to resolve the lien or pay the lien from the proceeds in escrow. “Ultimately, he decided to pay it through escrow; however, had he not, the sale would have come to a grinding halt.” 

Last-minute purchases

If you’re buying a new home, it seems natural that you would want new furniture and furnishings. However, you need to lasso your spending until you sign on the dotted line.

According to Eve Henry, a realtor in Prosper, Texas, those purchases are the biggest and most common reason for stopping a closing.

“Many times buyers will be pre-approved, get under contract, then decide to go buy new furniture for the house, or a washer and dryer or a mower,” she says. Whether you pay cash or not doesn’t matter. “Even if they open a credit card—at, for example,  Home Depot—it still shows as ‘potential’ credit.” And your loan can be declined the day of closing.  “I’ve seen many a buyer screw up their entire escrow because they went out and bought a fridge the day before closing,” Henry says.

Employment changes and verification

In the past, buyers could change jobs during escrow—if they were moving to a job in the same field. However, Henry says a lot has changed. “Many people are leaving jobs or switching jobs—even to a higher paying job—during escrow, which stops everything.”And the coronavirus has radically changed the process. “Thanks to the virus, employment is now verified an hour before closing.” And if there’s been any changes to the employment history, she says everything comes to a stop, and it will be necessary to completely start over in underwriting.