Proceed with caution when closing on real estate. There is a lot that could go wrong, and mistakes can be expensive to rectify.
A 2017 report found around 30% of real estate purchases were paid with cash. If you belong to the other 70% of the population, last-minute funding problems could require you to withdraw for one of two reasons:
- You cannot sell your property: If the buyer for your house or apartment falls through, the seller of the place you hope to purchase might refuse to wait until you find a new buyer.
- You cannot borrow money: When a lender gives you a mortgage quote, that does not guarantee they will give you a mortgage. They may change their mind when they do their final checks. It could be based on the value or security of the property. Or it could be based on their assessment of you.
Remember that a mortgage loan is a legal obligation. Exaggerating your income could lead the lender to take legal action if they feel you have defrauded them.
Property issues could make you want to back out of the purchase
Final surveys can turn up problems that the seller did not know about or mention. No property is perfect, but as long as you know about the faults, you can make an informed decision. Even if the property has title issues, it may not be the end of your dream, as there are sometimes simple ways to rectify clouded titles.
Inserting the appropriate contingency clauses into your real estate contract is crucial. Without them, you could find yourself contractually obliged to a purchase you no longer can make — or even want.