It can take up to 50 days, or sometimes even longer, to close on your new home after your purchase offer is accepted. At first, you're just hoping for good news. You're not thinking ahead to everything that's got to happen in the next one to two months if the closing is going to happen. You just want to get over this first hurdle of having your offer accepted.
Go ahead and pop the chilled champagne when you receive word that your offer is a go, but you're not quite there yet. Your home buying process is just getting started.
What Can Go Wrong?
You might have to arrange for a home inspection and other types of inspections as well, and the results must be satisfactory. Your lender will order an appraisal, and the home's value must be equal to or exceed the sales price. This will happen before the lender starts processing the loan.
These are just a few of the things that can morph into renegotiation or adjustments to your transaction. You might even end up canceling the sale and not buying the home at all.
You might think that you only need a real estate agent to help with the initial negotiations, but challenges often pop up on the way to closing that will require the finesse of a professional. You might not even notice what your agent is doing behind the scenes or how your agent is helping you.
What You Can Do as the Buyer
Buyers can help to make the process smoother. Whatever you do now, don't change your finances. Do not buy a car. Don't make any major purchases. Don't add additional debt to your credit cards and, above all, do not quit your job.
It's important not to alter your financial situation in any way during this time, unless it's to maintain or improve it, such as by continuing to make timely payments on your credit cards and loans. Derogatory changes can result in you ultimately being turned down for a mortgage.
Hang tight for a month or two and focus on closing your transaction.
If You Discover Major Defects
Be prepared to walk away from the home if you discover major defects with the property that can't be satisfactorily addressed.
You won't know what might be wrong with the property until you hire a professional home inspector. Talk to your real estate agent about the types of repairs—if any—the seller might agree to complete. Most homes are sold in "as is" condition, and sellers aren't always required to make any repairs at all. Are you prepared to foot the bill for fixes?
If Your Financing Falls Through
You might have to walk away as if you can't obtain the type of financing you thought you were qualified for, and the new loan terms are unacceptable to you.
It doesn't necessarily mean that you're qualified to buy the home just because you have a preapproval letter from a lender. An underwriter has the final say about your qualifications—and this happens after you've been preapproved. The "pre" is included in that term for a reason.
Your lender might have made a mistake by initially relying on verbal information that the underwriter can't verify. Or maybe you did change your financial situation in some respect. All this can result in you being offered a different loan with different terms than the one you were expecting, or not be approved at all.
Be honest with yourself about whether you can reasonably handle any changes to your loan, such as an increased interest rate from the one you thought you were getting.
You might not know if your loan will be approved until just days before you're ready to close.
If Your Appraisal Is Off
You might not end up buying the property if your appraisal isn't high enough to justify the sales price the seller has accepted. There's no guarantee that the seller will agree to a lower sales price just because the appraisal is off.
You can pay the difference in cash, but you might not want to do this, and some sellers might prefer not to sell under these circumstances. Not every seller will be agreeable to working with you after a low appraisal.
The Bottom Line
In 2017, a Trulia report found that less than 4% of all home sales fell through before closing, so the odds are actually in your favor that you'll make it all the way to the settlement table. Just keep in mind that a number of things can go wrong in the months that pass between offer acceptance and closing. There might be an issue with the property's title, or you might not be able to sell your existing home first. You can hope for the best but expect anything.
At the time of the initial writing, Elizabeth Weintraub, BRE # 00697006, was a Broker-Associate at Lyon Real Estate in Sacramento, California.