Three Hurdles To Overcome After Accepting an Offer
It's no secret that the AP Boys are wrapping up their second house flip. As of last Monday, we have accepted an offer and are under contract. That being said, we are far from the finish line and have a few more hurdles to jump over before we can call this thing a wrap. I thought it might be good to highlight three potential roadblocks that could impact your chances of going straight to bank and cashing an absolute whopper check before popping bottles.
Most buyers will include a financing contingency with their offer. What does this mean, you ask? It means they have a certain number of days after the offer has been accepted to back out of the deal in the event they are unable to secure financing through a qualified lender. If they are a GOOD buyer, they will include a pre-approval letter as part of their offer which should mitigate most of the risk. Now, lenders are notorious for slowing down the home-buying process. In some extreme cases, they could cause your deal to fall apart for a number of different reasons. Trust me... I know. Buyer's financing is really out of your control. Best thing you can do is accept an offer from a pre-approved buyer and hope that the lender they've selected doesn't completely screw you over.
I'm ranking inspection as the second most dangerous hurdle of the three. Why, you ask? Because buyers get scared... Especially first time home-buyers. An inspector's job is to find things that are wrong with your house, and believe me they will. After inspection, one of three things will happen: a) the buyer will accept the property as is and not adjust their offer; b) the buyer will adjust his/her offer and/or ask you to fix some things; c) the buyer will back out of the deal completely. They can only choose option c if they have included an inspection contingency with their offer (which most intellegent buyers will). The likeliest scenario is option b, which is not a deal breaker, but potentially a deal changer. Best thing you can do is get the house in the best shape possible prior to inspection.
Now we come to the largest, most intimidating hurdle... the appraisal. For those that don't know how an appraisal works, the buyer's lender will order an appraisal after inspection to determine the home's fair market value. This is determined by walking through the home and comparing comps (similar homes that have sold recently in the area). Now let's say you've accepted an offer for $100k, but then the appraiser comes in and says the house is only worth $90k. The lender will only issue a mortgage on the home based on the $90k valuation. So it now becomes the responsibility of the buyer to cover the difference. Well... most buyers don't want to pay more than what the house is actually worth, which makes sense. So you run a major risk of the deal falling through or the buyer adjusting his/her offer if the house doesn't appraise at the agreed upon purchase price. This one is also somewhat out of your control. Best advice I can give you is expect the unexpected and keep a level head if your house doesn't appraise at purchase price.
There you have it. Three hurdles to jump over before closing on the sale of your home. Did I write this to scare you? No. I wrote this to inform you of what COULD happen. Doesn't mean it will happen. Just trying to best prepare you for the unexpected.
AP = Always Prepared