Why Do Some Mortgage Contracts Fail to Close?
Here are some common reasons:
- The Buyer was not pre-qualified for a mortgage and could not obtain financing.
- The Buyer feels pressured and changes their mind.
- The Buyer has mortgage financing issues that were not detected when obtaining mortgage pre-approval.
- The Buyer has insufficient funds for a down payment or closing costs.
- The Buyer cannot remove their sale contingency and the Seller must eventually accept another purchase offer.
- The property does not appraise out for the purchase price.
- The appraiser finds numerous bank conformance issues or property deficiencies and the Lender cannot underwrite the loan.
- The Seller does not have enough money from the sale of their existing property to pay off mortgages, property liens and home equity loans.
- The Seller did not properly disclose known material defects to the Buyer.
- The home inspection report reveals too many property defects and deficiencies, and the Buyer chooses to cancel the contract.
- Environmental issues such as a buried oil tank, friable asbestos and high radon readings spoil the sale.
- Property repairs are not satisfactorily completed to Buyer or Appraiser’s expectations.
- The property survey indicates boundary disputes or encroachments.
- Property information was misrepresented, such as acreage, taxes, square footage, rental income and expenses.
- Legal issues or title defects obstruct the sale.
- Tenant lease or holdovers interfere with the Buyer’s plans.
- Poor Buyer, Seller and Attorney communication.
- Your attorney disapproves the contract terms.
Here are some reasons why closings are delayed:
- The Buyer fails to make an application to a lender in a timely matter.
- The Buyer fails to submit all necessary documents to the lender.
- The lending institution is overloaded with applications and cannot process all loans efficiently.
- The appraiser cannot gain access to property in a timely manner.
- The lender or Buyer may require a survey map of the property.
- The home inspector cannot gain access to the property or is delayed in processing the report.
- The water quality and/or septic test do not meet the lender’s underwriting guidelines.
- The wood destroying inspection does meet the lender’s underwriting guidelines.
- The home inspection report indicates many deficiencies and several repair estimates are required.
- Repairs are not completed in a timely manner or to the satisfaction of the Buyer or Appraiser.
- The property does not have clear title - free of liens and encumbrances.
- The abstract of title cannot be found and needs to be recreated.
- The attorneys delay updating, reviewing or approving legal work.
- The sale of property is tied up in probate or bankruptcy.
- The Buyer is waiting for a zoning or use variance before the property will close.
- The Buyer, Seller and Attorney communicate poorly or lose documents.
