Three Ways Financed Deals Can Go Bad When Selling Your Home

As I have mentioned earlier, when selling your home, you will want to favor cash deals because of the large number of ways finance deals can fall apart, sometimes within a week of closing. Financing a home used to be so much easier. In fact, it was so easy that many people got into homes too easily and we ended up in the financial crisis of the late 2000s. 

Mortgage companies and banks are much more strict now. With this new level of scrutiny, some seemingly good deals on paper can fall apart when the financing is not approved. For this reason alone, it is always a good idea to have a solid preapproval letter with all your offers when selling your home. These letters should not be taken at face value either as they can be faked, or the buyer’s credentials could be overstated. It is best to always have your listing agent call the mortgage professional listed on the letter to verify the buyer’s potential for a mortgage. However, even with this step, there are still things that could go wrong. Here are three examples.

  1. Buyer’s Financing is not Approved – What a minute? How can this be? Didn’t they have a letter with their mortgage preapproved? As insane as this sounds, some buyers will not be truthful with mortgage companies during their first initial application process. Buyers will want to get approved so they can get into their dream home and will say anything at the outset to get the mortgage. Some buyers have been known to lie about employment, their income levels and even cheat with their checking accounts by placing a large sum in their accounts. All of this to sway the bank to approve the loans. It is best to research which mortgage companies do a more intensive research on their applicants during the preapproval process and then only accept offers from buyers using those companies. If you don’t want to do this, at least have your real estate professional research the buyers’ mortgage company to find out what process was used to verify the buyers’ credentials.

  2. Buyer’s Credit Rating Changes – Yes, believe it or not, this also happens when selling your home. Some buyers will go crazy on buying “stuff” for their new home when the initial approval has been completed. This is unfortunate because they go through the same credit review later in the process as they did in the beginning. In fact, many banks will check it the week of closing. If large purchases have been made, the buyers’s credit will have been impacted, even to the point of losing the mortgage approval. As a seller, there is not really much you can do, but hope that the buyer’s agent has instructed his buyers not to purchase anything until they have the house keys in hand.

  3. Buyers Could be Lazy – Mortgages are a lot of work. They are also very invasive. If your buyer is not the most organized individual, or the most responsible, than delays can happen during the mortgage approval process because of things like not turning in the required paperwork when requested. Some buyers will fight some of the requests as they see it as an invasion of their privacy, further delaying the process. How might this ruin the deal? If the process takes too long, the closing has to be extended to accommodate the delays. If this happens several times, how long are you willing to be patient and keep extending the closing date? Eventually, you will tell them to get it done or move on.