Top 10 real estate deal killers (and what you can do to avoid them)
May 13, 2021 | Realtor Resources | Share:
Everyone wants a smooth, on-time closing that’s free of surprises.
Closing is a time to celebrate the hard work that’s gone into the real estate transaction, not a time to stress. Unfortunately, these common mistakes can lead to delays or problems with your closing if you’re not careful.
We’re identifying the top ten real estate deal killers - and what you can do to keep them from causing problems at your closing.
Real estate deal killer #1: The undisclosed addendum
We get it. Contract changes happen. But when the contract changes, the lender and title company needs to be notified immediately. While date or price changes can easily be changed on the original contract, most other changes will require an addendum. And if you have an addendum, it must be approved by the lender.
Your lender and title company need to know the whole story of what the sale includes. Whether the seller has decided to give money towards closing to repair an issue or a home warranty has been added to the contract, all contract addendums must be approved before closing. Failure to do so can result in disaster at the closing table.
Real estate deal killer #2: Complicated sales
Short sales, foreclosures, bankrupt sellers, trusts, divorces, and estate sales are all complicated sales that can result in issues at closing. Sometimes these issues won’t be clear at the time of contract. As soon as you see one of these red flags, notify your closing company immediately.
We’re not telling you to avoid these deals, but you definitely shouldn’t try to navigate these sales on your own, especially if you’re not experienced in these scenarios. Title and closing agencies have the experience needed to navigate these special cases, but you have to communicate with your closing company up-front that you have a complicated deal.
Real estate deal killer #3: Lame power of attorney
Sometimes, power of attorney is needed at closing if a necessary party is unable to attend the closing or execute documents before the closing. But if you need to use power of attorney, you need to do it right.
You should never arrive at the closing table with a power of attorney at the last minute. Alabama has specific power of attorney requirements, and you have to follow the rules. If you’re not sure what those rules are, contact your closing agent.
Never use an online, do-it-yourself power of attorney form. Each power of attorney must be approved by the title company. Some lenders also have their own company-approved power of attorney that a purchaser has to use. If you think you’ll need a power of attorney at your closing, don’t wait until the last minute.
Real estate deal killer #4: Payoff delays
Your clients need to get payoff information to your closing attorney as soon as possible after signing the contract. It’s easier for the owner to request payoff information themselves, but they have to get that information to the title company.
Your title company can order the payoff information, but they’ll need authorization that’s signed by the seller to do so. It’s actually far more complicated to get the payoff information this way. Either way, payoffs take time. And while you may have the payoff balance information in last month’s statement, this information is not enough to start the payoff. Encourage your client to get started on this right away so there are no delays at closing.
Real estate deal killer #5: The missing spouse
Relationships are complicated, and sometimes a marriage may be in limbo at the time of closing. However, in Alabama, there are no special cases: you are either married or unmarried. You are still considered “married” if you are separated or in the process of getting divorced. And if you are still married, your spouse must still sign the deed if the property is their homestead.
Exceptions are available to this rule, but your closing attorney needs to know well before closing in order to make these exceptions. If you haven’t gotten an exception, both spouses must be at the closing table. If one spouse fails to show, the closing will be delayed.
Real estate deal killer #6: Surveys
If your contract stipulates that a new, certified survey is required, your title company needs to see the survey as soon as possible so that you can close on time. A survey is not a subdivision map, builder plot plans, or a tax map. Surveys provide valuable information about a property such as boundaries, zoning setbacks, easements that may or may not be recorded, covenants, restrictions, paths, rights of way, and common driveways.
Title problems revealed by surveys may take weeks to remedy. For example, a survey may reveal that a driveway was built on part of a neighbor’s land. In order to close, you’ll need to get an easement for that driveway. Once you get the survey, don’t hold on to it until closing.
Real estate deal killer #7: Errors on REO or HUD properties
If your client is buying an REO or HUD property, expect a complicated closing process. With these closings, every step can take days, so you must plan accordingly. These closings seldom happen within the normal 45 days. Even small changes such as name changes or adding a buyer that are normally not an issue can take several days. These changes can’t always be done in an email, either.
REO properties require special forms from the settlement agent. This isn’t your typical sale, and it won’t be your typical closing either. Your title company or closing agent can help you with any questions you have.
Real estate deal killer #8: Forgotten earnest money
Don’t forget about the earnest money! Your broker must deposit the earnest money immediately. Once the earnest money has been deposited, make a copy of the check for the file. The lender needs to see proof that the earnest money has cleared the borrower’s account to move forward with the loan.
Be careful with earnest money. Email hacking and fraud are on the rise, so all funds need to be in the form of certified funds such as a cashier’s check or bank money order. Do not accept a personal check for earnest money.
Real estate deal killer #9: The prohibited escrow
Sometimes, the unexpected happens and a home receives damage while under contract. A repair escrow may seem like a great solution if you don’t want to delay closing to make the repairs. However, to utilize a repair escrow, all repair escrow agreements must be approved by the lender and the terms of the escrow must be absolutely clear.
If you believe there’s a need for a repair escrow, contact your title company and lender immediately. You cannot make arrangements for repairs at the closing table.
Real estate deal killer #10: Mail-away closings
Mail-away closings can be a great option for out-of-state buyers or sellers. However, to prevent delays, you need to let your closing company know right away if a mail-away closing is needed. You can’t decide to do a mail-away closing at the last minute!
Mail-away closings are doable as long as your closing company has accurate and complete contact information. Your closing company will need the name, email address, phone number, and address to send closing documents.
Even in complicated closing situations, you can have a smooth, worry-free closing. But as an agent, you have to make sure to pay attention, be proactive, and communicate clearly with your title and closing company to prevent delays in closing.
At South Oak Title and Closing, we’re here to help. Our experienced closers are the best in the business and have the knowledge and experience it takes to help you have an outstanding closing experience. We’re here to answer your questions and help you navigate even the most difficult closing circumstances so you can close with confidence. For more information about how South Oak can partner with you, contact us.