Three Ways a Transaction Can Fall Apart (And How To Prevent Them)

Sometimes there’s nothing that can be done, the transaction is just not going to close. But often there are ways to keep a precarious transaction together. Here are three ways that a transaction can fall apart, and some ways to keep it together.

 

1. Property Inspection Items

   1. On the listing side, doing a thorough “red flag” walk through prior to listing will help prevent this. Encouraging sellers to tackle some of the repair items even while it’s listed or while it’s in contract will increase the probability of closing.

   2. On the buyer side, pointing out some items in the walk through can help give perspective. 

   3. During the inspection, if you’re not sure, ask the inspector “Is this a big deal?” Often something sounds worse than it is.

   4. There’s no such thing as a perfect house. There may be a long list on the report, but which items are non-negotiable? As in, a buyer really won’t buy the house if XX doesn’t get repaired. 

   5. Homeowners should expect to spend at least 1% of the value of their house each year in maintenance and minor repairs.Can you live with something for a year or two until you get it repaired as part of homeownership?

   6. Sellers AND buyers can do repairs. There’s nothing in an inspection that the seller is unilaterally obligated to repair. There might be some things that have to be repaired, but the buyer can do those things too.

   7. Get an estimate and put money in escrow to make repairs at a future date.

 

2. Appraisal

   1. If the property appraises below the contract price, the buyer can make up whatever difference is needed to keep their Loan To Value ratio. They’ll make a larger down payment.

   2. Seller could come down in price to the appraised value

   3. There could be some middle ground between A and B.

   4. Review the appraisal report. If there are material errors or if there are egregious errors, the lender can ask the appraiser to revise it (rare).

 

3. Financing

   1. Shop lenders for a lower interest rate

   2. Look for a different loan program

   3. Look into an ARM instead of a fixed rate mortgage

   4. Make a bigger down payment

   5. Buy down the interest rate with points

   6. Get a gift to help with the down payment

   7. Borrow against retirement funds to make an additional down payment

   8. Seller financing for a portion of the purchase price

   9. Get a cosigner

   10. Have lender prescribe what exact steps you should take to increase credit score or improve qualifying ratios (better to do this at the beginning of the process)

 

If you are currently looking to sell or purchase a home in Central Vermont, call Green Light Real Estate at 802-225-6425.