3 Real estate deal killers and how to avoid them

Chad Banken
Chad Banken
Published on June 22, 2023

Want to hear something a bit surprising that you won’t hear from the media?

Last year, the folks at Cinch Home Services, a home warranty company, surveyed 1,000 real estate consumers and just a smidge more than half of the homebuyers claimed “… they had a home purchase contract fall through in that time period.” (Realtor.com)

We can chalk most of that up to rising interest rates and their attendant problems.

In “normal” real estate markets, however, the majority of real estate transactions go through without a problem.

Be that as it may, in any market, those transactions that hit a snag run the danger of falling apart.

Thankfully, most of the problems, if handled by professionals, won’t kill the deal. So, let’s learn some strategies to keep the deal alive through three challenging real-world scenarios.

1. The Homeowners Association

If the home you’re buying is in a managed community, you’ll be dealing a bit with the Homeowners Association during the purchase. You will receive a somewhat large amount of paperwork that you’ll need to peruse, often sign and, most likely want to run some of it by your attorney.

These documents contain some very important information and insights about what it’s like to live in the community. Some that you’ll want to pay close attention to include:

  • HOA meeting minutes
  • The budget
  • The CC&Rs (covenants, conditions and restrictions)
  • Evidence of liens and judgments against the HOA.
  • Current litigation against the association.

Don’t put off reading the documents or passing them by your attorney. The sooner you can confront problems, the less of a chance there will be for a deal killer to rear its ugly head.

2. Don’t mess up your mortgage approval

It’s a mystery to us why lenders don’t warn their clients that a loan approval isn’t permanent. There are ways to sabotage it and buyers should be forewarned about them.

Here’s a scenario: Marvin is approved for a mortgage and the transaction is sailing along toward closing. One day, he sees an ad for an appliance package with reasonable monthly payments.

The home he is buying lacks appliances, so this deal was too irresistible to pass by.

He has no idea that a “soft pull” is a standard procedure toward the end of the transaction. A soft pull is one last credit check, to ensure that the buyer’s financial position is the same as when he or she was approved for the mortgage.

By the way, it’s called a soft pull because it doesn’t impact the buyer’s credit.

Marvin’s appliance purchases, on credit, changes his debt-to-income ratio enough that he no longer qualifies for the loan. Unfortunately, fixing this problem will take time and money.

Mary committed another common mortgage error – she changed jobs. As in Marvin’s case, this changed her financial position and the loan didn’t close.

The moral of these stories is to keep all finances exactly as they were when you were approved for the loan.

3. Don’t be an unreasonable seller

It’s a very rare home that doesn’t have problems, which is why we recommend a home inspection, even with new home purchases.

As a seller, you should expect that there will be issues revealed by the home inspection. You should also be ready to address a request from the buyers to fix certain issues or pay to have them fixed.

Far too often we see home sellers who refuse to budge and adopt a take-it-or-leave-it attitude. The problem with this is that most buyers will hire a home inspector and he or she will reveal those very same problems.

Like the guy in the movie Groundhog Day, you’ll relive the scenario over and over as your home sits on the market and languishes.

One of the worst things that can happen is a failure to disclose problems that you know about. In fact, in extreme cases, sellers have gone to prison for failure to disclose a problem that caused severe bodily harm and even death.

Not only must you disclose major problems with the home, but “… any potential problem and material defect that could easily affect the value of the property being transacted,” according to the pros at Attorneys Real Estate Group in California.

Both parties in a real estate deal fear its possible delay or cancellation. The biggest reasons a deal falls apart, however, can be avoided by slowing down, thinking clearly, and having realistic expectations. Heed the advice of your real estate agent or attorney, and all should go smoothly.

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