With so many details involved in the sale of a home, from making sure a buyer’s finances are in order to checking on the condition of the property, it’s a challenging process. Sometimes issues arise — with the mortgage or improper permits, for instance — that lead to a sale falling through. Long Island real estate professionals, from agents to attorneys, share the five most common reasons home sales are derailed and offer advice on how to overcome the obstacles and make it to the closing table.
1. Mortgage issues
The inability to secure financing is the most common problem, housing experts say. This can happen when the buyers' credit score is too low or they have too much debt.
Autumn Lee, a real estate agent with Fave Realty in New Hyde Park, recommends that prospective buyers choose a lender carefully. She encourages them to take referrals from real estate agents rather than friends or family members because agents often know whether a lender can deal with difficult situations, she says.
“Depending on how resourceful that lender is, they can help solve the problem,” Lee says.
Lee says she recently had a home sale that nearly fell through because the buyers ultimately had a debt-to-income ratio that was too high. The lender worked with the buyer so they could pay down some of their debt, helped along by a gift from a family member.
2. Appraisal is less than the agreed-to price
Sometimes — particularly in a competitive market with homes receiving multiple offers — a home can appraise for less than the asking price or what the buyers offered, which can tank a mortgage.
Paul Fox, a loan originator with CrossCountry Mortgage in Melville, says it is important for buyers and sellers to make sure the asking price and offer are in line with recent comparable sales in that particular neighborhood.
“It’s really knowing the market and working with someone really experienced and explaining the whole process,” Fox says.
Buyers and sellers also can work together after a low appraisal, with the seller lowering the price, the buyer making up the difference in cash, or a little of both.
3. Title issue or defect found during inspection
While home inspectors often find small problems that can be resolved with an easy fix, occasionally they uncover defects that bring down the value of a house, making a loan impossible to get or scaring off the buyer.
Title problems, such as failure to pay back taxes or a mechanic’s lien (in which construction work wasn’t fully paid for), also can hamper a sale.
Fox notes that these are issues a seller needs to take care of. Sometimes liens and back taxes can be paid off with the proceeds of a sale. “It can be taken care of in many different ways, but the bank would want the seller to come clean on it,” Fox says. “Obviously, you want a clean title going into a home.”
4. Missing building permits or lack of a certificate of occupancy
It’s crucial for sellers to secure a certificate of occupancy for an addition or finished basement based on local building department regulations.
John Breslin Jr., a real estate and land use attorney in Huntington, advises sellers to do an inventory of what COs they have and make sure things are legal. “If you don’t have COs for everything, know what your plan is if it becomes an issue,” Breslin says.
Breslin recently worked on a home purchase in the Town of Huntington in which the buyers questioned whether the finished lower level of a 1960s ranch was legal. Before signing the contract, the buyers went to the town’s building department, which eventually determined that the lower level was part of the home’s original construction.
“It took some time to figure all this out and ultimately resolve it with the municipality,” Breslin says. “But instead of the deal busting, everyone was patient and allowed the time to figure it out. Oftentimes, when things like that come up, where we discover a CO issue that’s going to take time to remedy, the buyer can’t wait.”
5. Buyer gets cold feet
Buyers may change their minds, either for personal reasons or because of a problem with the property.
Evie Macaluso, an agent with Coach Realtors in Rockville Centre, had a buyer back out of purchasing a one-bedroom co-op apartment in Oceanside on the market for $299,900.
“She thought she had to do too much work,” Macaluso says of the potential buyer, who had offered $295,000 in cash.
To avoid a similar situation, Macaluso had the seller continue to improve the apartment for future showings by painting it and having it cleaned. After the work, the apartment quickly went into contract.
“Because it has a fresher color, it becomes much more attractive,” Macaluso says. “The paint made such a big difference in the buyer’s perception.”