When you enter into a real estate transaction, whether you’re buying or selling, you can be fixated on getting the sale done. There’s typically excitement or anticipation that comes with this, and while you might be focused on the big picture, it’s the small details that often make or break a deal.
Below are some things to pay attention to during the process. However, your best bet for having a successful transaction is to consult a real estate professional.
Transactions fall apart for a variety of reasons. Here are the most common culprits:
Looking for your dream home is the enjoyable part of the process, but the other work associated with buying a home can cause many buyers to take a step back and realize that they may not be ready for home ownership.
The financing process and paperwork required, the inspections, the bidding and negotiating on price can all factor into a buyer pulling out of the process, leaving the seller to start over.
Similarly, a seller can view listings in a hot market as a great opportunity to get a big payday. However, once into the process, it can become daunting. Repairs and renovations needed to prepare the home for sale, open house showings that can disrupt everyday life, or price haggling with the buyer are all reasons for some sellers’ stress.
Many transactions can fail because of tightened lending, the significant down payment required or the steep credit score needed. Most residential real estate transactions require financing by the buyer, so the possibility of getting stopped at this step in the process is not unusual.
Cash is still king, and California remains attractive to international investment buyers who often make cash purchases and do not rely upon financing.
Often times a real estate transaction is contingent upon buyers selling their current home, or sellers closing on their next home. This can be tenuous and require the help of a Realtor for a smooth outcome.
Appraisals are ordered by the lender to determine the market value of the property. Transactions can fall apart if the appraisal and the contracted sale price are significantly different. In a market where inventory is low and sellers look at capitalizing on that to get a higher price for their home, this can quickly backfire when a lender won’t budge on the true market or comparable value.
So how do you overcome these issues and protect your home buying or selling dreams?
Let’s take them one by one:
Buyer motivation: The best thing you can do for yourself as a buyer is be proactive early in the process.
Getting prequalified with a lender helps you know what you can afford and also decide what and where you want to buy. Rely on your agent for advice. Because no transactions are exactly alike, having a real estate professional you trust is a must in this process.
Seller motivation: Sellers also need to be well prepared and versed in what hurdles they may encounter during the process of selling their home.
Understanding why certain steps should be taken will help you push through and keep motivation to reach your ultimate goal.
You should also get a Realtor you trust when selling your home. Different homes sell for different reasons and having an experienced agent can help sellers maneuver steps in the process like staging, showing and negotiating for the best price for their home.
Financing: Learn your credit score and what you will need to improve it, if you need to. A real estate professional can help you understand your budget for your home purchase.
Contingencies: If a sale is contingent on buyers selling their own home, or sellers closing on their home, you can offer to put them up in a hotel or make other concessions that allow more time for the process to continue. If the contingencies are based on structural repairs that will take more time, the two parties can negotiate a better timetable for getting the repairs done.
Appraisals: If the appraised value of the home is significantly lower than the asking price, the seller can lower the price, or the buyer can increase his or her down payment to cover the short fall. Either way, that price difference has to be made up if the lender is to approve the loan.
Real estate transactions are complex, whether you are on the buying or selling side, and the potential for them to fall apart along the way is very real. Understanding the land mines ahead of time and having a plan to counter these challenges is the first step.
It also pays to use a qualified real estate professional who is used to these roadblocks and experienced at helping buyers and sellers navigate them.
The dream of home ownership is absolutely achievable. Don’t let these factors prevent you from realizing it.