Avoiding the Closing Door: 6 Things That Can Tank a Real Estate Closing

Buyers, sellers, and real estate agents alike push for speedy and standard closings to minimize risk and wasted time. Unfortunately, the closing process can be unpredictable, with potential problems lurking around every corner. 

Avoiding the Closing Door: 6 Things That Can Tank a Real Estate Closing
Photo by Florian Schmidinger on Unsplash

Fortunately, you can bypass many real-estate-related complications simply by understanding the risks and learning how to predict incoming roadblocks. 

Improper documents

Real estate deals can fall through when one or both sides fail to provide the necessary documents at closing. For example, notary publics must witness buyers and sellers signing documents to verify legitimacy, leaving many unknowing buyers scrambling to find a nearby service. 

However, real estate agents can avoid delays by conducting a quick Google search for a "mobile notary near me" and hiring one for the local closing. 

Other paperwork problems often involve homeowner associations, title releases, and insurance requirements. Agents should check all necessities before bringing buyers and sellers to the office for an official closing. In some cases even after the deal is closed, some parties would still not agree to the terms stipulated in the papers they have signed due to some technicalities of some clauses in the contract. A case in point are timeshare property investors who will eventually get out of time share because of hidden fees that are not clearly stated in the contract.

Problematic pre-approval letters

Because real estate agents ask for quick offers, some home buyers turn to speedy pre-approval letters. However, not all pre-approval letters are the same, and ones without proper verification are null and void. 

To sidestep frustrating delays, real estate agents should inspect the letters closely to ensure the buyer has the verification to make an offer and obtain proper credit to purchase the home. 

Issues with the home inspection

When an offer has a contingency attached, the closing could tank. Home inspections can reveal problems like excessive mold, foundation issues, asbestos, or other expensive repairs. 

Though some homeowners love being able to turn around a property, others want a move-in-ready situation. Sellers should be up-front with the home's problems in their disclosure statement, so they don't end up with canceled closings. 

The title isn't clean

Real estate deals must include clean titles to ensure a speedy closing process. If a title has liens, judgments, forgery, or other complications, the sale cannot continue until each issue is resolved. 

To avoid dirty titles, real estate agents should conduct a title search during the escrow process. Additionally, the homeowner and lender should have title insurance for protection against claims to the property. 

Insurance companies won't insure the property

Insurance companies can refuse to cover a home if it’s in a high-risk area or if the previous owner made several claims. In addition, some insurance companies won't issue coverage if inspectors find problems with mold or termites. 

The only way a buyer can purchase a home without insurance is if they pay cash, as all lenders require insurance before issuing a mortgage. 

Financing falls through

While most buyers only make offers when they have a pre-approval letter, some sneak through without one. 

To avoid failed financing at the last second, sellers should only accept bids from buyers with pre-approval letters. Some buyers can't obtain funding because they've lied about the application or their job situation has recently changed. 

Wrap up

While most real estate transactions happen with minimal delays, there are always exceptions. Buyers, sellers, and their agents should practice due diligence on all aspects of the real estate transaction to ensure that closings happen promptly without unexpected problems.