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How to Avoid Issues Prior to Closing

Whether one is  buying or selling, the realtor  has to be concerned with many aspects of the process. The goal is to have a smooth transaction and  avoid any issues prior to closing. The realtor should do due diligence when listing a property or representing the buyer.  This includes but is not limited to, checking assessment cards, building department files, requesting updated surveys, checking for environmental issues, confirming taxes and square footage. One should also check for any violations and open permits. The realtor should also request HOA and coop/condo rules and bylaws. However, even after doing one’s due diligence the following are some problems that can arise during the transaction. These issues can either delay or prevent closing.

  1. Co-Ops– Lenders prefer not to lend in co-ops that have more than 50% investors or if the property is a land lease. Too many investors make lenders uncomfortable; if one person defaults it can destabilize the building’s finances. Confirm that your lender will lend in a particular coop.

  2. Inspection issues– Termites or infestations have to be dealt with prior to closing. Most banks require a termite inspection. Other inspection issues can be defects in electrical and other systems, underground oil tanks, water in basement, roof damage, old furnaces and compressors. Buyers usually ask for underground tanks to be removed which means testing the soil. Many objections can be handled  with a reduction in price, a credit or if the seller will make the repair. Other environmental issues involve high levels of radon gas and asbestos and remediation is typically paid for by the seller. 

  3. Walk through concerns – Some examples of problems at a walk-through include: broken appliances,  cracked windows, water in the basement, or fixtures removed that were to remain.

  4. Title issues – A defective title can result in problems establishing ownership; a title search will uncover any issues prior to closing involving  ownership, liens, violations, surveys.

  5. Liens – liens are placed on a property to force an owner to pay a debt. Any liens on the property must be  paid before the property is sold or paid at the closing through the proceeds.

  6. Covenants and restrictions (C&R) – These are the promises that the original owner made to someone else; for instance an owner may give permission for his neighbor to access his property or limit the use of the land. This runs with the land and the attorney usually checks for this when reading the  Covenants and Restrictions (C&R).  

  7. Boundary or survey problems – Encroachments, easements, fences, illegal decks or shared driveways must be resolved before a title company can insure the property. At the start of the transaction have an updated survey done  to avoid any issues.

  8. Fraud with previous owners

  9. Estate issues: a relative could falsely claim ownership to the property.

  10. Change in credit history – It’s not prudent to make any large purchases or change employment prior to obtaining a mortgage. This could change one’s credit profile and prevent one from obtaining a mortgage.

  11. Buyer fraud – if the mortgage is filled out incorrectly or fraudulently by the buyer, the bank will not lend

  12. Difficulty obtaining homeowners insurance – if a major claim was made against the property a company may deem the property high risk or uninsurable

  13. Seller backs out – they receive a better offer (price or terms) or changed their mind. A buyer may collect damages from the seller. A buyer can also change their mind but may lose their deposit.

  14. Buyers mortgage commitment expires and could cost more money to extend the rate.  One may also have to pay a penalty or get a higher interest rate 

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