When you think about why home purchase contracts fall apart, mortgage financing is probably the first issue that comes to mind.
But there’s actually another reason why most real estate contracts fall through – the home inspection.
The February 2015 Realtors Confidence Index Survey asked real estate agents what types of problems they encountered with their most recent sales contracts over the past three months.
Of those that were terminated, 29% cited home inspection/environmental issues. This was the number one response given, beating out issues related to obtaining financing, which was cited 24% of the time.
This is why NAR recommends that real estate agents work with their sellers beforehand to address any potential property issues, such as structural concerns, water damage, mold, lead paint, and so on.
Interestingly, these types of issues can also cause FHA financing to fall apart because of related health concerns.
Inspect Your New Home!
In any case, it’s actually a good thing that inspections are serving their purpose; pointing out flaws and potential problems.
Sure, you don’t want contracts to fall through, but if there’s something wrong with the property, the buyer should know.
That’s why it’s highly advisable to actually show up to your home inspection. And not only show up, but also ask thoughtful questions and follow the inspector around the house as they conduct their work.
If you have any issues, even seemingly minuscule concerns, you should bring them up just to be sure. Otherwise you might be kicking yourself.
At the end of the day, an inspector is just one person, and even if they do a good job there’s a chance they could miss something. Better safe than sorry.
Financing Is Still a Hurdle
Despite financing not being the number one roadblock, it continues to be a major issue for many would-be home buyers.
After all, it was cited in 24% of responses, and many of the other answers can be somewhat categorized as financing issues.
For example, the buyer losing their job, appraisal issues, title/deed issues, financing delays, and so on. Many of these have to do with the bank as well, and wouldn’t necessarily be an issue if you were paying cash.
Instead of hoping the lender won’t notice, it’s advisable to clear up any issues beforehand.
For example, making sure you can document recent housing history, moving assets into a verifiable account several months before applying for a loan, and ensuring your credit is in good shape and not at risk thanks to a recent large purchase.
Simply staying on top of these seemingly basic tasks can greatly improve the chances of your loan actually closing.
Remember, lenders have seen it all, so trying to fool them or pleading for an exception once the loan is submitted isn’t exactly the best course of action.
For the record, real estate agents who responded to the survey noted that seven percent of sales contracts were terminated over the past three months.
Read more: Why mortgages get declined.