I was thrilled when the sellers accepted my offer on a tear-down lot in McLean, VA, the perfect place to build my own âDowntown Abbeyââstyle manor. And the deal went forward without a hitchâthat is, until closing day.
Soon after I arrived at the title companyâs office on the big day, my real estate agent sheepishly handed me a set of 40-year-old covenants that restricted what I could build on the site. Looking back, I know that I should have smiled politely at the six people gathered and suggested we reconvene later after Iâd studied this giant wrench in my plans. But I didnât want to inconvenience everyone, so I closed the deal.
It was an agita-inducing mistake. Even though those covenants didnât derail my dream homeâs construction, they caused me constant anxiety.
This is not just a concern for those building a home from scratch: For many home buyers, closing day is daunting, and coping with last-minute surprises can be tricky. Some problems are minor and easy to solve; others can wreck a deal. So which are which? Letâs take a look.
Ugly walk-through revelations
The dreaded walk-through is the top reason for surprises on closing day, and for good reason: This final inspection of the home happens the day before your settlementâor even the morning ofâso thereâs little time to prepare for whatever problems might pop up.
Who knows? A sudden storm could have poured water into the basement, or now that the furniture is all gone, cracks in walls or other flaws may be exposed.
How bad is it?If the problem is serious, like flooding, you should definitely proceed with caution. To avoid this snafu, make sure to inspect a home as thoroughly as possible before your final walk-through to avoid last-minute surprises.
Donât be shy about asking for another look-see after a big storm to vet for dampness or flooding. But a last-minute discovery of a problem is not necessarily a deal breaker. Just ask the seller to cover the cost of those repairs, and put the funds in escrow. Be sure to come with estimates from professionals on how much those fix-its will cost.
What stays, what goes
Another common issue that crops up during the walk-through is misunderstandings about which items get transferred with the sale. For instance, maybe you loved the sellerâs antique stove, ceiling fan, or other household item and assumed it would stayâbut you find out the sellers took it with them.
How bad is it? Unless youâre really attached to the item, you may want to let this one slide if you want this deal to go through. The easiest way to avoid these misunderstandings is to delineate in a contract what remains in the house or must be moved out. "If anything is questionable, always discuss it with your agent "says Tony Landaverde, Realtor with eXp Realty in San Antonio, TX.
âBe very detailed on whatâs staying and going,â he says. âWasher, dryer, ceiling fans, fixtures, appliancesâbe diligent during your initial inspection.â Also, make sure the contract reflects your expectations.
Even though you were probably approved for a mortgage a month or so earlier, even small changes in your financial picture since then can affect your credit score and create problems up to the moment you close on the property. Changing jobs, applying for a credit card, falling behind in paying bills, even sudden infusions of cash can red-flag your deal.
How bad is it? Pretty bad. If a lender withdraws the offer, you wonât be able to close until you secure another mortgage, which could take weeks. Or, if the lender wants to increase your interest rate, as it usually does in these situations, then youâll have to decide if you can still afford the purchase.
To head this issue off at the pass, contact your lender the day before closing to discuss and solve any issues that may have turned up. Also, try to avoid making any sudden financial moves in the weeks leading up to the close, like quitting your job or receiving a $10,000 âgiftâ from a family member to help out with home buyingâthat could, ironically, throw a wrench into the process.
Money transfer misunderstandings
On closing day, the chief order of business is to transfer funds. Some financial institutions and title companies prefer cashierâs or certified checks; others want funds to be transferred electronically. Show up with the wrong paperwork or account numbers, and youâll be left scrambling.
How bad is it? This misunderstanding should be nothing more than a speed bump. To avoid it, ask your agent and lender before closing what form of payment is required. Also bring your checkbook to pay for small items that might crop up, like an unpaid electric bill.
A title companyâwhich confirms details about your property such as past ownership, liens, and the aforementioned covenantsâcould bring up issues on closing day. If that happens to you, donât be afraid to step back and insist on taking time to digest any details, problems, or stipulations attached to the property.
How bad is it?It depends on what the search turns up. Some problems, like tax liens or a claim on the property from a relative or co-owner, can postpone a closing. Other things, like the covenants I mentioned above, or unpaid HOA dues, may be surprises but not deal breakers. But any and all title defects must be fixed before you can close on the property. It may be frustrating, but when you leap into homeownership, itâs always better to be safe than sorry.
Thank you for this great article entitled "5 Common Closing Day Suprises And How To Deal" by Lisa Kaplan Gordon