This week I got a text message from a home owner who was rightfully frustrated and she was looking for some advice!
She and her husband were supposed to close on Friday. However, they found out via the buyers that they wouldn’t be closing because of some “appraisal contingencies”. Before we dig into “How is this happening?”, let’s take a look at the context, and lets see what brought us to this issue.
First, when we have an issue with an appraisal, this means that the lender had an appraisal done on the house to evaluate what kind of house the lender would be stuck with if the new buyer walked out of the house the day after closing and never paid a dime on their mortgage. They are looking to ensure that they aren’t overpaying for the house, and they are looking to ensure that they aren’t getting a lemon of a house.
So when she says that she isn’t going to close because of the appraisal, it means that the appraiser found some things in the house that makes the house a liability to the lenders, (usually a safety issue) and loan underwriters will not authorize closing until the issues are resolved. Now, 99.9% of the time, these issues are none negotiable, and a home owner is either going to fix them, or they won’t sell the house. Once the repairs are made, the work has to be validated by the appraiser, and the appraisal has to be resubmitted to the mortgage underwriters. It’s important to point out here that lenders typically have time to resolve these types of issues built into their process to prevent something like this from happening. So when this happens, someone dropped the ball.
So how is this happening, and what can be done about it?
Well, I wish I could say that this type of thing never happens. But 100% of real estate agents have experienced something like this because of their own actions, the actions of the agent they are working with, or the lender who forgot to order the appraisal. If you’re the buyer or the seller though, you’re going to be angry, and you’re going to blame your respective agent.
But when that happens, it’s important to remember that although it may sound like it’s over and you aren’t going to to sell your home, asking the right questions and the right attitude can get you to the closing table. But in order to do this, you’re going to have to put your frustration aside and realize that if you’re the SELLER, you’ve got to move fast, and you need your agent to be very honest about your buyers situation.
In this situation, EVERYONE involved MUST know the answers to the following questions so you can find a resolution that will work for everyone without taking you back to square one as a seller:
- Are the buyers willing to extend the closing date? The real question here is do they really want to buy the house or not? If they do, and are willing to extend the closing date, then your agent can draft up the paperwork and move the closing date to allow for the repairs and reappraisal process, Everyone Wins!
However, some times buyers can reach a point of “F-It” in a transaction when they have been negotiating from an adversarial position. This “F-it” attitude can come from a hard negotiation process, from the attitude of their agent, the translation of YOUR (The Seller’s) attitude to them, or the attitude of your agent. In order to beat this “F-it” attitude, some people typically will need to apologize, and you’ll need to find some concessions i.e. give them some money.
- Can you (The Seller) afford to put the house back on the market? Keep in mind that this option can be extremely expensive if you’ve already purchased a new home, or you have already spent a considerable amount of time on the market. Real Estate Agents like to say that there’s no “slow seasons” in Real Estate, this is a lie. Anyone who looks at the data can see that busy and slow seasons exist. Your agent can hustle, but that doesn’t mean that their hustling isn’t more fruitful in the warmer months.
- Do they (the buyers) have a place to stay during the extension? This is an extremely important question to ask if you live in an area with a large relocation population, or your buyers are relocating from another area. A considerable amount of people pack up their stuff and move expecting to arrive at the closing table in a uHaul, then drive to their new house and unpack. Don’t believe me, there’s actually a 35% chance that your buyers are buying this house without having actually physically walked through the house according to a study conducted by Redfin last year. So when they say that they don’t have a place to go, they could actually mean it!
If this is the case, and your buyers are truly homeless, and the top two questions you answered “No” to, you may need to offer something that MOST AGENTS advise against. The “Early Occupancy”. This allows your buyer to move in early prior to closing. Now, this does have some risk to it if your buyers aren’t serious about closing. But IF they are serious, this can be a very useful tool that can be the difference between closing and having to potentially wait another 3-6 months for another offer. Do not automatically default to “no” on this option.
So these three questions are the questions I ask to everyone anytime this situation raises it’s head, I’m fortunate that I haven’t had to deal with this very many times. But during this situation it’s important to remember to stay positive, remember that your goal is to buy your home, or sell your home, so that you can get on to the next chapter of your life. This is not the time to get hung up on who’s at fault. Because when you’re in this place, you’ve got to remember that everyone is needed to get this resolved. What happened to my friend? Well, they answered “yes” to the first question, and it looks like they are going to close, and sell their home.
Do you have a question you want me to answer? Drop your question in the comment section below!